Wages analysis is one of the many areas in which Akyra provides assistance to clients to mitigate the possibility of potential Fair Work claims by an employee.

The Fair Work Commission (FWC) conducts random inspections, which means that even without any employee complaints, your business could be subject to inspection.

A recent example is the inspection in July of 21 businesses in the Noosa Shire food precincts of Noosa Heads, Sunrise Beach and Noosaville. Businesses included fast food, restaurant and café sector ranging from ‘high-end’ restaurants to ‘cheap eats’ venues. The inspections were prompted by intelligence from a range of sources, including anonymous reports.

These inspections recovered $223,107 for underpaid food outlet employees with the most common breach being underpayment of or failure to pay various types of penalty rates (14 businesses), followed by failure to pay correct minimum wages for ordinary hours (11 businesses), overtime (six businesses) and leave (six businesses), and record-keeping breaches (five businesses).

How to minimise the risks

When Akyra speaks with a new client, there is sometimes a notion that not all the rules apply because they are a small to medium business. The one sure thing in today’s world is that the legislation applies to any business, anywhere.

The wages analysis undertaken by Akyra is one way to mitigate underpayment of wages as we compare the timesheets against the wages paid under the relevant Modern Award. This process identifies where any underpayments might have occurred and allows the business to organise any discrepancies and ensure future wages are correctly paid.

Pay compliance and minimising wage theft, whether inadvertent or otherwise, is a key governance obligation and should be at the forefront of organisations’ risk mitigation strategies. Akyra has found that most underpayment of wages is inadvertent – however, not being aware or understanding the legislation around wages will not be a defence. This all means the implementation of proactive controls to ensure compliance is more important than ever.

Other ways in which risk of underpayment can be minimised include:

1. Clear and comprehensive payroll policies can help ensure all employees are paid correctly and should include details about pay rates, overtime, deductions, and pay schedules.
2. A regular review and update of the payroll process can help identify any potential issues that could lead to underpayment – i.e. check that your payroll system itself is set up correctly.
3. Automation of the payroll process can reduce the risk of human error, which is a common cause of underpayment. There are many payroll software solutions available that can help streamline this process.
4. Create a detailed payroll calendar to ensure all payroll tasks are completed on time – e.g. processing timesheets, calculating pay, paying the wages and distributing payslips.
5. Keep abreast of legislation, laws and regulations related to wages and employment as they are constantly changing.
6. Accurate and complete records are essential for correct wage payment – e.g. records of hours worked, rates of pay, overtime worked and how paid and any benefits provided.

The consequences of wage underpayments

Remember, changes to underpayment of wages come into play in 2025 where intentional underpayment will become a criminal offence. And even though the underpayment may be unintentional, the employer will have to prove the unintentionality… which is, in itself, costly in terms of manhours, disruption to workflow and dollars.

There will be significant legal and financial consequences, so it’s crucial to take these steps to ensure that all employees are paid correctly.

As part of the Closing Loopholes Bill, there are clearer pathways for employers who self-report to Fair Work and take reasonable steps to repay the correct amount. Employers will not be subject to criminal penalties for honest mistakes

However, where the underpayment is intentional, penalties are severe:

• for a company, the penalties can be three times the amount of the underpayment or $7.825 million.
• for an individual, the penalties can include a maximum of 10 years in prison, three times the amount of the underpayment or $1.565 million

The other important factor to remember is that underpayment is a breach of trust with your workforce as well as being a breach of the law.