There has been significant media coverage recently surrounding Woolworths admitting to be underpaying around 5,700 staff for several years. It is estimated that these workers have been underpaid between $200 million and $300 million in total, while the upper management of Woolworths enjoyed multimillion dollar pay packets and hefty bonuses.
The admission has caused shock as many people assume that a large organisation like Woolworths would “have its act together” in terms of payroll processes, and would ensure that its staff are being paid correctly. Sadly, it appears that is not the case and it's likely many more large organisations who have fallen into the same error.
Although it has not yet been confirmed, the underpayment relates to workers who are:
- covered by a Modern Award or Enterprise Agreement
- paid an annual salary
- regularly work in excess of 38 hours per week
In many industries workers are paid an annual salary for all hours worked, and there is an expectation that the annual salary will compensate the worker for any hours worked in excess of the standard 38 hours per week. For a worker who is not covered by a Modern Award or Enterprise Agreement, this expectation may be legally correct or appropriate. However, the situation is different if the worker in question is covered by a Modern Award, (and in some cases an Enterprise Agreement).
What are Modern Awards and Enterprise Agreements?
All Modern Awards, and many Enterprise Agreements, provide for overtime rates to be paid for all work done in excess of 38 hours per week.
If a worker who is paid an annual salary is covered by a Modern Award or Enterprise Agreement which provides for overtime rates of pay, then that worker is still entitled to receive the benefit of those overtime rates. That is, the fact that the worker is paid an annual salary does not mean that the entitlements provided for in the relevant Award or Enterprise Agreement no longer apply.
Rather, the legal position is that the annual salary paid to the worker must equal or exceed the amount that the worker would be entitled to receive pursuant to the terms of the modern Award or Enterprise Agreement calculated on the basis of the applicable hourly and overtime rates for the actual hours worked.
This requires a regular (and, indeed, a continuing) audit by the employer to ensure that the annual salary, or more correctly, the weekly or fortnightly component of that annual salary, is not less than the amount the worker would be entitled to receive for the actual hours worked based on the Award or Enterprise Agreement hourly and overtime rates.
Woolworths wage theft explained:
If Woolworths requires its salaried workers to regularly work in excess of 38 hours per week, and has failed to check whether the salary paid is sufficient to cover the workers’ Award or Enterprise Agreement entitlements, it results in those workers being underpaid.
When should annual salary workers be paid for overtime?
Many employers think that people who are paid an annual salary are not entitled to overtime payments if they work more than 38 hours per week. For management who are earning an annual salary of millions of dollars, this is undoubtedly the case. However, workers who are lower on the totem pole, are likely being underpaid.
We stress that this is only an issue if the salaried worker is covered by a Modern Award or Enterprise Agreement which provides for overtime payments. If the worker is “Award free”, as is the case with most “management” (except in certain industries such as retail) this issue will unlikely arise.
Are you being underpaid?
You may wish to consider whether you have been underpaid if:
- if you are paid an annual salary,
- your employment is covered by a modern Award or Enterprise Agreement
- you regularly work in excess of 38 hours a week,
If you are in this position and wish to seek some advice on this question, please contact our workplace law relations team.