What Employers Can Learn From Fair Work’s Recent Action Against Coles

The Fair Work Ombudsman has accused Coles Supermarkets of underpaying 7,812 workers $115 million dollars between 2017 and 2020.

Most of the staff were managers who were salaried workers, and responsible for a department within a Coles supermarket, such as the bakery or customer service.

Fair Work alleges that Coles paid these salaried employees wages that were below their minimum lawful entitlements, and didn’t take into account significant amounts of overtime work under the General Retail Industry Award 2010.

Coles has previously disclosed that it was reviewing the pay of salaried workers who were also covered by awards in its liquor and supermarket business.

The issue affected staff at regional and metropolitan stores Australia-wide. The underpayments range from small amounts to nearly $500,000. It’s alleged some 45 employees were underpaid by more than $100,000.

The Ombudsman has commenced legal action against Coles. If found guilty, the company will have to pay back the outstanding amount, as well as penalties of up to $63,000 per breach.

Coles has begun the process of paying back its employees, but Fair Work believes the company has significantly underestimated the amount owed, with more than $108 million remaining outstanding.

Fair Work Ombudsman Sandra Parker said underpayments resulting from insufficient annual salaries for employees covered by awards had become a persistent issue among businesses of all sizes, across a number of different industries.

“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,” Ms Parker said.

‘Set and Forget’ Annualised Salaries

Many businesses place workers covered by awards on salaries. This is perfectly legal, but Australian law requires employers to ensure that their employees’ salaries are no less than their award entitlements.

These entitlements will depend on how often the employee works. In the case of Coles, the employees worked overtime, which when combined with their base award rates, added up to be more than their annual salary. This meant that they were underpaid.

Fair Work also believes Coles didn’t keep records of overtime being worked, which is required under the Fair Work Act. Businesses are required to keep timesheet records for seven years. The Ombudsman will push for the onus to be on Coles to prove these allegations to be false.

The Three Steps to Staying Compliant

Fair Work is ramping up its compliance program, ordering more surprise audits, and has recouped more than $100 million in underpaid wages this year. The best way to avoid underpaying salaried employees is to have strong processes in place which rigorously check to see if wage arrangements are compliant with Australian law. Tanda recommends taking these three steps at the very least to ensure compliance.

1 .Audit Salaries

Auditing salaries is crucial to ensuring wage arrangements are compliant with Australian law. To do this, a reconciliation of award entitlements against a worker’s salary is required. This can be complicated – if a business is using manual timesheets, large amounts of data entry could be required. Having digital records will simplify this process.

2. Use the Correct Award

It’s important that a business ensures it’s using the correct award when calculating the annual salary. Misclassifying an employee will result in the wrong award rate being applied, potentially exposing a business to underpayment. Some employees aren’t covered by awards, but will still be covered by the national minimum wage. If their wage amounts to less than the award or minimum wage, it will count as underpayment. Any business should rigorously check award coverage and ensure they take a cautious approach to ensure employees are correctly classified.

3. Keep Accurate Records

Businesses need to keep timesheet records for seven years. It’s important to have a high quality system in place that accurately records the time employees work, and keeps it on file. It’s also important that this system uses proper measures for recording time and attendance, like having an employee sign in, rather than “half-measures” like computer logins or security passes.