Despite self identifying and correcting more than $13m in underpayments Coles is facing court proceedings with a significant disagreement in the remaining amount to be backpaid leading to the Fair Work Ombudsman launching the action.

 In 2020 Coles identified underpayments to salaried staff due to a lack of provisioning for additional overtime in the salary calculations, and a lack of structured review of actual hours worked against the modelling to ensure that staff were better off overall.

 To date Coles has identified and paid back over $13m in underpayments, and has identified a further $12m as the likely remaining amount to be paid out.

 Despite this the Fair Work Ombudsman has initiated court proceedings arguing that the calculations done by Coles have been a significant underestimation of the amount owed.  The Fair Work Ombudsman is alleging that Coles underpaid more than 7,800 managers a total of $115.2m, with 45 managers owed more than $100,000 and one manager owed more than $470,000.

 In launching the court action the Fair Work Ombudsman Sandra Parker noted “businesses paying annual salaries cannot take a set and forget approach to paying their workers.  Employers must ensure wages being paid are sufficient to cover all minimum lawful entitlements for the hours their employees are actually working and the work they are actually doing.”

 Learnings for all businesses

 As ACAPMA has covered extensively salaries come with specific modelling and review requirements – https://acapmag.com.au/2020/02/annualised-salaries-changes-in-effect-1-march-2020-get-ready-now/

 A salary must provide for the employee to be better off for all the work that they actually do…not just the work that is planned for them to do when they first commence employment.  Typical salary modelling that looks at what a regular week will be and applies all of the Award minimum payments and then extrapolates that out to an annual figure will be inadequate and will result in underpayments if provision for reasonable additional hours is not included. 

 “Even with a ‘reasonable additional hours’ buffer included in the salary calculations the business will find itself facing mounting and snowballing underpayments if they are not regularly reviewing the ACTUAL hours worked by employees and then adjusting their salary to ensure that the employee is being appropriately compensated for the hours they ACUTALLY work” explains ACAPMAs Elisha Radwanowski.

 “This actual hours modelling must be done at least annually, but should ideally be done quarterly to allow for adjustment and to manage the other issues that come with excessive overtime, like fatigue and the false economy of overworked staff” continued Elisha.

 “In the end it is simple.  If you have  staff on a salary you need to regularly check the actual hours they are working and the hours they are paid for in their salary, and adjust to ensure all hours worked are appropriately paid for.  There is no excuse.  There is no confusion.  The word Salary is not a magic wand to wave to allow unpaid overtime to be expected or worked” concludes Elisha.

Here to Help

HR Highlights are things to consider, implement and watch out for in your business.  They are provided as general information for you to consider and do not constitute advice.  You should seek further advice on your situation by contacting your legal advisor.  ACAPMA members can access resources and receive advice, guidance and support from the ACAPMA employment professionals via employment@acapma.com.au , it is free for members.  ACAPMA Membership delivers this and more benefits, see; https://acapma.com.au/membership/  for more information.

 Elisha Radwanowski BCom(HRM&IR)
ACAPMA

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