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Fair Work Ombudsman Investigation Finds 47% of Employers Not Paying Correct Wages

The Fair Work Ombudsman's nationwide investigation into the fast-food sector finds that nearly half (47%) of 565 spot-checked employers have not been paying their staff correctly, with workers being paid as low as $6 per hour compared to the statutory minimum of $17.25 per hour.

Re: Audit of fast-food outlets finds half exploit their workers, by Nick Toscano, The Age, Thursday March 31, 2016


Fair Work Ombudsman Investigation Finds 47% of Employers Not Paying Correct Wages
 
The Fair Work Ombudsman's nationwide investigation into the fast-food sector finds that nearly half (47%) of 565 spot-checked employers have not been paying their staff correctly, with workers being paid as low as $6 per hour compared to the statutory minimum of $17.25 per hour.
 
The investigation also found that some employers were paying employees on the basis of ‘flat rates’ of pay for all hours worked, with many employers advising they had adopted this practice to simplify their payroll processes.  However, whilst simplifying payroll processes, the ‘flat rate’ approach exposes employers to a range of penalties and compensation orders for failure to comply with Industrial Relations laws.
 
The Fair Work Ombudsman’s investigation found that in nearly one-third of cases, the flat hourly rate paid by the employer to its workers was not enough to cover hours attracting penalty rates and loadings, resulting in underpayments for which an employer could be ordered to compensate the underpaid worker, and fined for breach of the applicable Industrial Award.  Additionally, if the workers have been underpaid, the employer should be ordered to make good and pay a fine.  But employers should be even more concerned if they think they are doing the right thing!
 

The Risk of the Flat Hourly Rate
 
The two-thirds of employers in the fast-food sector who choose to pay their workers a ‘flat hourly rate’, that covers all award entitlements, should know that the Federal Court can order them to pay their workers twice for ‘theoretical’ underpayments, and to pay significant fines for the ‘technical’ underpayment.
 
In 2015, Linkhill Pty Ltd was fined $313,500.00 for allegedly underpaying 10 workers a total amount of $152,865.00.  Linkhill was also ordered to pay the workers the amounts of the alleged underpayments (a total cost to Linkhill of $466,365.00).  
 
The frightening truth of Linkhill’s costly experience before the Federal Courts, however, is that Linkhill’s workers were not underpaid at all!  Linkhill, like many employers identified in the Fair Work Ombudsman’s investigation into the fast-food sector, paid the 10 workers a ‘flat hourly rate’, that was well above the workers’ Award entitlements (in fact, $253,281.00 above the workers’ Award entitlements).  But this stood for nothing in Federal Courts.  Linkhill’s payment to the workers of a ‘flat hourly rate’ was held not to include penalty rates and other allowances, despite the fact that the amount of the ‘flat hourly rate’ paid to the workers more than compensated them for these Award entitlements!
 

Gary Morgan, Director of Linkhill Pty Ltd, says:
 

Both State and Federal Politicians know exactly what the problem is – they just don’t want to tackle it –  despite nearly half of all employers audited in the Fair Work Ombudsman’s investigation into the fast-food sector underpaying employee wages, and a significant percentage of those employers doing the right thing but paying employees a ‘flat hourly rate’, the potential for fines and additional income tax revenue to find its way into the Government’s coffers is massive.
 
“The fast-food sector is only the ‘tip of the iceberg’.  Everyone knows ‘cash-in-hand’ work is rampant throughout the entire hospitality sector.  And the services sector.  And the building and construction sector.  In fact, the Industrial Relations system is now so biased against employers, and complicated, that employers in every sector are increasingly turning to the ‘cash economy’.
 
“Employers underpaying workers, or dealing in cash, must be prosecuted – doing so will go a long way to raising enough revenue to fix Turnbull’s Budget deficit.  But I have no confidence in any Federal Government Agency or Federal Court Judge enforcing correct wages under Industrial Relations laws.  They show no interest in differentiating between an honest employer and a dishonest employer, and don’t even seem to care.
 
“The Fair Work Ombudsman needs to investigate a sample of Politicians, Public Servants and Federal Judges who pay their ‘home help’ in cash, fail to make sure tax is deducted, don’t pay the superannuation levy, or pay less than the statutory minimum wage.  The results would be worse than those reported for the fast-food industry!

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