Wages underpayments: the price you pay

Celebrity chef George Calombaris’ hospitality empire has back paid $7.8 million in wages and superannuation after being caught up in a wages underpayments scandal involving more than 500 current and former employees.

Mr Calombaris is a founding and current shareholder of MAdE Establishment and served as Director from 2008 to 2018.

Fair Work Ombudsman (FWO) Inspectors found that the MAdE group companies did not pay some staff at the correct classification level for their duties under the Restaurant Industry Award, which particularly affected casual employees.

Inspectors also found that significant wage underpayments at the MAdE group occurred because they failed to correctly apply annualised salary arrangements for some staff, including by failing to conduct annual reconciliations to check that workers on annual salary arrangements were paid for overtime and penalty rate hours worked. 

As well as the wages and superannuation repayments, MAdE Establishment will also make a $200,000 contrition payment to the Commonwealth Government’s Consolidated Revenue Fund.

After entering into a Court-Enforceable Undertaking (EU) with the FWO, the group faces ongoing regulatory scrutiny and must fund external auditors to check pay and conditions for workers across the entire group every year until the EU expires in 2022.

Fair Work Ombudsman Sandra Parker said in a statement that “MAdE’s massive back-payment bill should serve as a warning to all employers that if they don’t get workplace compliance right from the beginning, they can spend years cleaning up the mess.”

From a HR perspective, failing to correctly classify employees covered by an Award is at best, lazy. Getting it right is simply a matter of reviewing the Classification section in each Award and comparing the characteristics and typical skills and duties defined in each classification level against the primary duties of a position.

Applying annualised salary arrangements for employees with Award coverage can be a little more tricky.

Employees covered by a Modern Award are entitled to receive the benefits specified under the respective Award. Some employers elect to pay an annualised salary, often because they run in-house payroll and believe it’s simpler to provide an all-inclusive amount rather than calculate the penalties and allowances that might apply to individual employees each pay run.

Employers who intend to remunerate individuals covered by an Award under an annualised salary should use either an Annualised Salary Agreement (if this is permitted under the Award) or have specific wording in the Employment Agreement confirming the remuneration is “all-inclusive” to set off the annual salary amount in satisfaction of minimum Award entitlements such as minimum wages, allowances, leave loading, penalty rates, overtime, and weekend and public holiday rates.

An all-inclusive salary needs to be higher than the amounts the employee would have received under an Award for the hours worked. Apply the “better off overall” test…is the employee better off overall under the annualised salary arrangement? 

Whether it’s paying your staff correctly or making sure you and your business is Fair Work compliant, why take the risk of getting things wrong which can result in wage theft?

Read more about annualised salary arrangements here or get in touch with Bare Bones Consulting for a complimentary first consultation.

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Bare Bones Consulting is a leading HR Consultancy on the Gold Coast. We also provide HR services in Brisbane and can help business owners all across Australia.

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