When discussing wage rates with my clients, I often hear a client say words to the effect of “its okay, they are on a salary, so the Award does not apply”.

It is important for employer’s to realise that if the work an employee does is covered in the classification section of the relevant Award, the Award will cover the employee and the provisions of that Award will apply.
When working out a remuneration package, I find that employers will usually take one of two of the following approaches, which are:
• Determine what the employer can afford to pay and offer this amount, say $45,000 per year as compensation for all the hours an employee earns. The relevant Award is generally not known in these types of arrangements and no hours are set.

• The other way is for an employer to load up the employee’s ordinary hourly rate, in excess of the Award requirement, this is usually called a “flat rate”. For example, the relevant award prescribes an ordinary hourly rate of $21.68 and the employer pays the employee $25.00 for all hours worked.

When assessed against the relevant Award, the salary or loaded hourly rate would seem to be fine as the employee is earning more than they would have under the relevant Award for working their ordinary hours.

Where employer’s come undone though, is in relation to the penalty rates and overtime the employee may be working. Most Awards require an employee working a penalty rate day or overtime, to be paid *1.5 for the first 2 hours (some awards still have 3 hours) and double time thereafter.

Recognising that the Award provision will take precedent over the common law arrangement. If the salary or the loaded hourly rate is not in excess of what the employee would have received under the relevant Award, the employer is exposed to a wage’s claim which can be very costly. Another thing to recognise is that an employee can mount a claim for payment of back wages for up to 6 years.

In a very recent matter, celebrity Chef George Calombaris, following an audit into his company by the Fair Work Ombudsman was found to have underpaid 500 staff, across his Hospitality Group $7.83 million. The Group admitted to multiple contraventions of the Fair Work Act 2009, and to incorrectly applying annualised salary arrangements.

In addition, as well as failing to keep adequate time records for some annualised salary employees or conduct annual reconciliations to ensure it covered overtime and penalty rates, the group admitted that it incorrectly classified some workers.

In addition to back paying the $7.83 million, Mr Calombaris’s hospitality Group also entered into an enforceable undertaking of $200,000 as a contrition payment to the Commonwealth as well as other various penalties.

If you are concerned that your business may be exposed to a costly wage claim, call me on 0428 112 009