A Year in Review: Key Issues Uncovered During FY24 Payroll Investigations

The recent focus of boards and the Fair Work Ombudsman (FWO) on wage compliance has resulted in Morris Forensic undertaking a large number of payroll investigations during FY24 for a mix of large corporates, private businesses, educational institutions and not-for-profits.

In this article, Nick steps through the compliance issues we have identified, including some of the themes that are emerging from the FWO’s compliance program and the enforceable undertakings imposed.

The SCHADS Award

The Social, Community, Home Care and Disability Services Award (SCHADS Award), and the industrial instruments based on this award, continue to provide headaches for service providers. Our investigations have identified that a large number of payroll systems are not keeping pace to adequately track the various employee entitlements in the SCHADS Award, including:

broken-shift penalties;
meal break allowances where more than one hour of overtime has been worked;
sleep disturbance penalties;
overtime where an employee has not had a mandatory rest period; and
classification issues relating to employees working in the supported independent living space.

Given the significant complexities of the SCHADS Award, we have seen organisations receiving increased pressure from the unions to ensure systems adequately capture the appropriate penalty rates.

Long Service Leave

Recent fines issued to Coles, Woolworths, Commonwealth Bank of Australia and Optus in Victoria for incorrectly paying long service leave benefits have garnered significant media attention and highlighted the need for businesses to review their long service leave practices.

The Long Service Leave Act in South Australia presents significant challenges for payroll systems in light of the requirement to measure in weeks, where payroll systems typically measure long service leave in hours.

We have identified the following general issues with long service leave:

casual employees not receiving long service leave where they have at least 7 years of continuous service; and
long service leave not being paid based on the average hours worked by an employee over the most recent three year period and/or the three year average incorrectly excluding overtime.

Superannuation on Penalties

Businesses are required to pay employees the superannuation guarantee on all ‘ordinary times earnings’, which includes penalty rates. The superannuation guarantee is generally not paid on overtime.

We have identified a number of instances where the superannuation guarantee has not been paid on penalty rates. This has often stemmed from the organisation not distinguishing between ‘time and a half’ and ‘double time’ arising from penalties and overtime.

Enterprise Agreements

The significant increases in modern award rates in the last two years, driven by persistently high inflation, has led to an emerging issue where the rates in some enterprise agreements have fallen below the relevant award.

This has not been identified by a number of businesses, who have continued to pay the rates established by the enterprise agreements, resulting in underpayments over the past 12 months.

Unpaid Time

There have been a large number of high profile class actions recently relating to employees not being paid for work performed before and after the official start and end of a shift (e.g. a pre-shift site inspection) and having meal breaks deducted in circumstances where the employee could not take a meal break.

In our compliance reviews, we have identified contracts that require employees to arrive more than 10 minutes before their shift start times to perform menial tasks and instances where managers have directed employees to record that they had a meal break in circumstances where they could not take that meal break.

Further, we have seen one instance of a business not paying employees for trial shifts.

Over extended periods of time and large workforces, these seemingly minor indiscretions can result in multi-million dollar claims.

Employees working Multiple Roles

We have seen a number of instances where a person holds multiple part-time roles at an organisation, sometimes under different industrial instruments. This often leads to the question of whether the employee should be paid penalties for overtime, broken shifts, etc…

In the recent Federal Court case of Lacson v Australian Postal Corporation [2019] FCA 51, the Court set out that, to avoid multiple roles being viewed on a cumulative basis for the purpose of penalties, the employer needs to be able to demonstrate that:

The employee is performing two, distinct roles;
The employee does not believe that they are working one job and believes that they are working separate jobs; and
The arrangement is not being used as a method to avoid paying penalty rates.

To demonstrate that the employee is working separate jobs and that the employee is aware they are being employed to work more than one job, we recommend that employers consider:

giving the employee separate employment contracts and pay slips for each role;
whether the employee’s contracts make it clear that the organisation has engaged the employee to perform multiple jobs at the employee’s request; and
accruing leave separately for each role.