Worried about underpayment claims? Invest in an efficient payroll system

In early June 2023, Fair Work Ombudsman (FWO) Sandra Parker dropped some astonishing numbers about one of Australia’s worst-ever underpayment scandals: $430 million, owed by mining giant BHP for 13 years of underpayment.

In this article, we will walk you through what happened, the mistakes BHP made, and how you can avoid making them.

What happened?

In May 2023, BHP announced it had incorrectly deducted public holidays as leave for more than 28,000 employees, causing a mass underpayment of $430 million in total. FWO Parker found this frustrating, given she had put the miner and other top listed companies on notice about their payroll four years ago. That $430 million includes superannuation and interest, and is the result of incorrectly treating public holidays as work days when deducting annual leave since 2010.

The source of the problem? BHP is understood to have failed to update its payroll software to account for National Employment Standards (NES).

How can businesses avoid making the same mistake?

Owing $430 million is enough to wipe most Australian companies off the map. And while underpayments are very real and very common, the only good aspect about them is they cost you less the sooner you correct them. Underpayments can be a scary thing for an employer especially if you become aware of the fact that you may have underpaid employees for years and now need to rectify those mistakes.

With recent changes in laws around underpaying staff, it’s more important than ever to make sure you have all your ducks in a row and are dotting your i’s and crossing your t’s.

Recently, Parker said that meaningful investment in proper payroll, record keeping, and auditing can go a long way towards avoiding underpayments. As they say, ‘prevention is better than cure’ – having proper systems and processes in place is one of the best ways you can proactively protect your business against an underpayment claim.

From 200 to 2300: you’re over ten times more likely to receive a compliance notice if you underpay staff

Wage underpayment has been a key focus of the FWO in recent years, with notorious wage theft scandals and large-scale underpayments coming to light. From issuing only about 200 compliance notices a year in 2018, the FWO has increased to issuing 2,300 compliance notices in 2021-2022.

While the FWO prefers to take the approach of allowing employers to rectify their mistakes and negotiating practical and reasonable actions, Parker says the FWO will “continue to take [employers] to court” for any businesses that “fail to cooperate or refuse to meet” their minimum payment obligations.

Whether you’re a small business or a large corporation, the FWO and the Australian Government are taking a special interest in policing wage underpayment and are upping their enforcement in this area. The new  Closing Loopholes Bill (2023)  that was recently passed criminalises intentional wage theft as a federal offence, carrying penalties of up to 10 years imprisonment and significant fines.

Get your payroll compliance in check. Save now, avert costly surprises in future

Prevention is better than a cure – it’s much less costly, less damaging to reputation, and more efficient to pay employees correctly than to rectify underpayments. Consider investing in an efficient payroll system and seeking advice from HR experts on what you should be paying your employees.

The team at Citation HR offer award-winning payroll compliance services. If you’re not 100 per cent confident with your payroll processes or award/agreement interpretation, get in touch via our 24/7 Advice Line.