8 common underpayment tactics

8 common underpayment tactics

If you thought underpaying staff was black and white, guess again – there’s as many ways to pay employees less than what they’re entitled to as there are Real Housewives franchises.

We’ve listed – and explained – the 8 most common ones that seem to be cropping up as more and more stories of wage underpayment emerge, so you know what to keep an eye out for.

Zombie agreements

Zombie agreements refers to the practice of having people employed under workplace agreements made during the controversial WorkChoices era, in which workers entitlements were significantly reduced compared to current standards.

While all agreements made during the WorkChoices era nominally expired in 2012, the agreements stay in place until they are challenged or replaced. So while it’s technically not illegal to pay staff under a zombie agreement, it rarely (if ever) would pass the Better Off Overall Test outlined by the FWO.


Superannuation rort

All Australian employees who earn over $450 a month are entitled to a minimum of 9.5% superannuation, to be paid by their employers into their nominated superannuation account.

However, a report by Industry Super Australia and superannuation fund Cbus found that in the 2013-14 financial year, employers failed to pay at least $3.6 billion in super contributions.

Unlike other underpayment methods, failing to pay super is something that easily slips under the radar – after all, is a 20-year-old barista likely to notice they’ve not been paid money into a fund they can’t access for another 45+ years?


Half-pay scams

One that came to light after the 7-Eleven story broke, a half-pay scam involves employers paying employees half the pay for twice the amount of work.

It works like this. An employee works, say, 40 hours a week. The employer then pays them for 20, effectively halving their pay rate.

It’s generally employees on working visas who are targeted in a half-pay scam, as those visas often have a limit on how many hours a person can work. If an employee complains about being paid for only half their hours, the employer threatens to alert authorities and have them deported for violating the terms of their visa.


Free shift scam

The free shift scam really only works in very specific scenarios.

It usually goes something like this.

The employer owns multiple businesses – let’s say, a cafe and an independent supermarket. The employer rosters on an employee for a five-hour shift at the cafe, and puts that shift into the timesheets accordingly. However, they then ask the employee to do a shift at their other business, unpaid.

While of course the employee could (and should!) say no to this, they often won’t, for fear of upsetting their employer.


Cashback scams

Oh boy. Of all the ways to underpay employees, the cashback scam could well be the most offensive.

It involves employers ticking all the boxes – rostering staff on appropriately, having staff work their correct hours, paying them the award rate for each of those hours, and processing that pay.

You know, like a normal job.

But unlike a normal job, the employer then makes the employee withdraw part of their pay from their account and hand it back to them in cash – so everything looks peachy keen on paper, while the employee still ends up with less than they’re entitled to.


Cash in hand

Cash in hand arrangements aren’t exactly anything new – and in fact, they’ve long been something as a mutually advantageous scenario for employees and employers alike. Employers get to pay their staff a little bit less, and employees get to still claim Centrelink benefits, as there’s no record of their income.

However, there’s obviously issues with cash in hand arrangements.

It means that employees don’t get superannuation. It means they likely don’t get penalty rates. It means that the employee and the employer are not contributing what they should to taxation revenue. It can mean fraudulent benefits claims.

While a cash in hand arrangement may be one of the few underpayment methods that an employee wilfully enters into, it generally is not in their best interest in the long term.


Leave accruals

Whether you’re entitled to any kind of paid leave – be it annual or personal – depends entirely on whether you’re considered a permanent employee or not.

Casual employees – that is, employees without guaranteed hours – are not entitled to leave accruals. As a result, they get paid what’s called ‘casual loading’, which equates to a higher hourly pay rate compared to their permanent counterparts.

If you’re not getting paid casual loading, then chances are you should be accruing leave as you work. If you’re not accruing leave, then chances are you should be getting paid casual loading.

As with not paying superannuation, missing out on leave accruals is the sort of underpayment that may go unnoticed by an employee.


Unpaid hours

A bit of a grey area – largely because it’s so commonplace – is when employees are asked to work unpaid hours.

It’s especially common in retail and hospitality, where employees are expected to be at work 15 – 30 minutes prior to their shift starting to open or close the venue. And while 15 – 30 minutes on either side of a shift feels pretty inconsequential, it can mean up to an hour a day, or five hours a week, 20 hours a week, or 240 hours a year.

Assuming the national basic wage of $17.70 an hour, that could end up being over $4000 a year – not exactly small potatoes.


So what does this mean?

There are so many ways that employees can end up being underpaid, and even employers with the best of intentions can fall victim to Australia’s complex employment laws.

To avoid the issue entirely, employers and payroll managers need to be fully aware of what the rules are, and the consequences of breaching those rules. Similarly, employees should be aware of their rights, and make an effort to check payslips and super statements to ensure nothing is slipping through the cracks.

We’ve got a number of resources on current employment standards, award rates and more to help both employees and employers in our blog – take a look now.

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