Hypothetical question: when a business underpays its staff by 2.6 million...

oztite on 05/04/2017 - 10:17
Last edited 05/04/2017 - 10:59

I always wonder when things like this happen… if a business underpays its staff, and we are seeing it more and more around in Australia, almost certainly the business owner is heart broken by the news and tells us that the welfare of the staff is the top priority… what should we make of it? If it's simply a common accounting error? If so, why do we not hear similar amount of "overpay" problems in the news? Probability would dictate that 50% of "errors" would be underpay, and 50% of "errors" would be overpay. Furthermore I have never heard of management/ CEO being "accidentally" underpaid for a few years. What's your view?

Disclaimer: a complete hypothetical scenario, not referring to any specific business.

Poll Options

  • 193
    Underpayment is almost always INTENTIONAL
  • 7
    Underpayment is almost always UNINTENTIONAL
Financial

Comments

  • pao2x on 05/04/2017 - 10:26
    +1

    Over the past 8 years Ive only had one wrong payment to my advantage once. A couple of dozen times less so………..

  • [Deactivated] on 05/04/2017 - 10:33

    i know how much i need to be paid….
    if its under that on pay day i question my employer.
    its so simple.

    • Rumbaar on 05/04/2017 - 11:14
      +3

      How do you know what you're entitled to be paid?

      You understand this refers to people thinking they are meant to get say $1000 a week, and get $1000 a week. But are entitled to receive $1100, the business hasn't been paying them what their entitled too.

      • MrBear on 06/04/2017 - 09:11
        +1

        You know what your salary or wage is before you start a job, so to calculate your take home pay…

        Obviously there are some exceptions to the ease of this, but in most cases, let's say hypothetically a waiter or kitchenhand, it is fairly straight-forward.

        • Rumbaar on 06/04/2017 - 09:34
          +5

          You're missing the point.

          Waiter and Kitchenhand, what is the current award rate for them? Someone on a mixed part or irregular shift, will not know what they're meant to be taking home as a gross wage, then net. So if they're told they're entitled to $10 an hour and get it, then that's what they expect. But maybe the award indicates that after x amount of hours they're entitled to $11.50 an hour. How are they meant to know that, other than trusting their employer is correctly calculating their wages.

          You're assuming the employer is correctly paying and informing their employee of their entitled hourly rate.

        • tomsco on 06/04/2017 - 11:51

          @Rumbaar:

          While an employer must follow an award, they are publicly published, so the employee can investigate if they want.

          If they are not sure what award they are under, ask the employer. Yes, classifications can get a bit confusing, but if they take the time to read it, or ask someone with a better understanding to help, they should be able to work out what they are entitles to.

          Now, I am not at all justifying an employer short paying due to an employees ignorance (I think any employer that does this should feel the full force of the law), but the information is there to determine if they are being paid correctly.

          It's similar to people that never check their super account and all of a sudden realise their employer didn't pay them super for 5 years.

        • Rumbaar on 06/04/2017 - 14:00

          @tomsco: So the employees are at fault for the 2+ years and 2.5M of incorrectly paid wages for the business we're talking about in this hypothetical thread? I'll be sure to pass that onto the 7/11 employees that were exploited recent too.

          Yes the onus is on the employee to ensure they're getting correct wages, but when employer doesn't seem to know what they're doing how is an employee meant too.

        • tomsco on 06/04/2017 - 14:50
          +4

          @Rumbaar:

          So you missed the point where I said I'm not justifying the employers actions? I'm simply saying for important things, people need to learn to inform themselves, rather than just relying on the info provided by biased parties.

        • Rumbaar on 06/04/2017 - 15:42

          @tomsco: How would an employee of this business educated themselves to this fact, in the specific case (thread)?

        • PVA on 06/04/2017 - 15:53

          But that may not be the correct amount.
          That's why businesses are being caught out. They tell staff that it's $18 per hour but legally it's $25.

        • tomsco on 06/04/2017 - 15:58

          @Rumbaar:

          By finding out award they should be on and reading up the classifications to see what they should be classed as.

        • greatlamp on 06/04/2017 - 18:00

          The employees were on 38 hr pw contracts

          They worked for 45 to 50 hrs pw

          They weren't entitled to this because 'thats the way it is in hospitality'

          It's not employee ignorance

        • Scrooge McDuck on 06/04/2017 - 23:36

          @Rumbaar:

          Their job contracts should state which award or enterprise bargaining agreement applies to their employment.

          Of course that's not much help if they lack the English proficiency or patience to comprehend it.

        • super8 on 07/04/2017 - 06:36

          @tomsco: Employees should be able to rely on info from their employer because section 345 of the Fair Work Act prohibits anyone offering misleading information about another persons industrial rights. But this is very rarely relied upon in courts; Fair Work Ombudsman and (most) unions don't have the resources or interest to present such contraventions to the courts.
          Private individuals are hampered from persuing it in the courts because the Fair Work Act is a "no costs" juristiction, so no lawyers will take a case on contingency.

        • tomsco on 07/04/2017 - 08:42

          @super8:

          Yes, they should. Unfortunately there are a lot of unethical people out there that take advantage.

          I'm sure for every 7-11 or Dominos that is reported, there are a dozen or so more businesses that get away with it due to employee ignorance.

          Employees taking it upon themselves to know their rights and enforce them can only be a good thing. If employers know employees will start pushing back, then it makes it harder for them to take advantage. Unfortunately there will always be people that may struggle with this, as pointed out by @Scrooge McDuck above.

  • Oofy Doofy on 05/04/2017 - 10:36
    +2

    If cost of doing business in Australia is problematic for somebody, then it's time to reconsider things.

    I haven't come across much in terms of underpaid wages, but I've seen many cases of unpaid/underpaid Superannuation, where it has been unpaid for many years in fact. The business disappears, then it pops up again running under another person's name.

    Some people in this country have found ways to run away from business debt, and they continue to do so.

    I do not know what the answer is.

    • gimli on 06/04/2017 - 22:11
      +1

      Should I have another slice of toast

  • dazweeja on 05/04/2017 - 10:44
    +6

    "Probability would dictate that 50% of "errors" would be underpay, and 50% of "errors" would be overpay"

    Not really because many issues aren't related to the base pay rate - although some are - but are to do with overtime, penalty rates, etc, not being paid. Management/CEOs would never be underpaid for more than a single pay because they are acutely aware of how much they should be paid, aren't in fear of losing their job so are not afraid to bring it to the attention of whoever is responsible, and are usually not paid overtime (in high income positions anyway), penalty rates, etc. Also, obviously the award rate is irrelevant to them.

    I think you'll find the people that are being underpaid are those that are afraid to speak out for whatever reason.

  • mskeggs on 05/04/2017 - 10:55
    +5

    How hard do you look for errors in your bills, invoices etc. that favour you?
    If something seems a little cheap, you just shrug and think, I was expecting more than that. If it seems a bit high you look into it.

    I'm sure the hypothetical employer intended to pay the staff correctly, and probably made some attempt, but didn't go through exhaustive efforts to make sure every single item was perfect.
    The moral is, check your pay slip and question any discrepancy.
    I agree with the law that the employer should take responsibility to correctly pay you, but in practical day to day experience, nobody cares as much about you getting paid correctly as you do.

  • lupiter on 05/04/2017 - 11:13
    +10

    I have seen unintentional underpayment, where info didn't get through to HR about changes in someone's conditions/role in time for pay day. This is generally fixed by the next pay day.

    I've seen a lot more intentional underpayment, especially in hospitality, where it's the business trying to cut costs. Sometimes they self-justify, ie it's okay to pay cash in hand at $9 an hour for the first month because it's a "trial period", or running shady internship programmes that are basically free labour "but they get experience!!". Sometimes they just don't care about labour laws or their employees at all. Nobody get's paid overtime and we don't care! Everyone has to turn up an hour before shift starts to clean! Any food rejected by the customer comes out of your pay! It's cheaper if we don't pay super so we don't!

    This is often never fixed. People go through long processes with Fair Work and never see their pay, super, or other entitlements. The owners phoenix the business and keep going, or the franchiser which made the 'rules' gets off with a warning.

  • JetLi on 05/04/2017 - 11:15
    +1

    When you have a lot of casual / part time, transient staff who work overtime, weekend/ public holidays it may be a little more difficult, however, if you have good processes in place to begin with and payroll staff who know what they are doing, surely such discrepancies would have been quite obvious to pick up. For a discrepancy of this scale, surely someone has just turned a blind eye to it.

  • tomsco on 05/04/2017 - 11:25

    I can say that an employer of mine has overpaid a few times (not me). Due to the award we're on, the payment for public holidays is not always set in stone (ie. When Boxing Day is on a weekend).

    The concerning thing is, they've made the same error over multiple years, but not to all staff. Eg. one year staff A & B be got overpaid, but not X & Y. The next year X & Y got overpaid but not A & B.

    My issue is with how they have handled the recent one, especially seeing as it's their stuff up. They sent a letter asking for it to be paid back (fair enough), but in the conclusion threatened debt collection if it wasn't paid back. My thoughts, send the first letter apologising and asking. If nothing, send a reminder. If still nothing, than consider escalating, throw in a phone call. But to start with the threat of debt collection really peeved me off (even though it didn't happen to me personally).

  • RockyRaccoon on 05/04/2017 - 11:30
    +4

    But Gold Logie winner Waheed Aly said he understood George and his explanation that it was unintentional, when he interviewed the Masterchef on the project last night.

    Now you can watch Masterchef on Channel Ten again, after this stunning revelation

  • bobbified on 05/04/2017 - 12:04
    +3

    According to some reports, there have been staff that have been overpaid - ie, they were put on a higher base salary than they should have been. Apparently they won't attempt to claw back the overpayments and the impacted staff will retain those high bases.

    (http://www.afr.com/business/banking-and-finance/masterchef-j…)

    But I guess a headline about staff being underpaid (given the current controversy surrounding 7-11 and Dominos) grabs more attention than staff being overpaid.

    • oztite on 05/04/2017 - 14:52
      +1

      You are right, there is definitely mention of potential overpayment. The key would be the amount. Was it an overpayment of $10,000 and underpayment of 2.6 million? Or was it overpayment of 2.6 million and underpayment of 2.6 million? Furhtermore, there are reports that suggest the $2.6 is the "net", i.e. total underpayment - total overpayment.

      Steven A Cohen is the famous hedge fund manager at SAC who almost certainly committed insider trading and got away with it, in the process making billions. If you google him, he is listed as a philanthropist though because he has given away a tiny portion of his money.

      Just because there is a bit of overpayment does it make it OK for a company to underpay by a significant amount? I would like to give him the benefit of doubt myself, because he comes across as a good man, but thought I'd seek the general Ozbargain opinion on this.

    • Rumbaar on 06/04/2017 - 09:37
      +1

      Ha, you can't be overpaid. If that's the salary you're being paid, then that's it.

      There is minimum wages to protect employees. But if a company wants to pay their employee a million dollars to sweep the floor, then that's their wage. Sounds like a stupid remark to try and justify the fact they've ripped off a lot more than they've 'over paid'.

      • bobbified on 06/04/2017 - 09:52

        I'm on salary and I've been overpaid a few times at different companies - the payroll systems don't always work in the way the person operating it thinks it does. Eg, automatic payrises based on CPI, human error where overtime is entered twice and approved.

        On all occasions, the companies have never tried to recover it. There was $10K overpayment at one time and they told me it was too much paperwork to receive a cheque back from me because I'd already left the company and off their payroll system. "No one would know where to bank it or know how to do the journal entries to offset the difference" is what they told me. I obviously didn't complain. haha

        • Rumbaar on 06/04/2017 - 10:02

          Well the favor was theirs, as you don't have to agree to pay it back and if you do can say $5 a week. But their only choice to take legal action against you.

        • Sensiekatie on 06/04/2017 - 12:00

          Boy … I wish my ex-employer would think like that. I am caught up in the payroll debacle of a government department here in Qld. The errors were 2010-2011 and I was made TPD by them in 2013.

          They have never asked for the just over $2000 until last year (after the premier made a promise to get the money back). They have been totally harassing me yet they cannot provide a copy of the original payslips. What they provide is estimated and adjusted ones. The software was completely screwed up. Their Attempts at correcting it have been a joke - the system still makes errors.

          I was on a salary but not required to work public holidays. The system cannot cOpe with that and my useless boss was hopeless at administration and Could not be bothered to correct the automated rosters before signing them. So we were all overpaid.

          It is all a big mess. I do not earn and nor can I agree it is hard. The industrial relations laws mean nothing to the Qld government. Both parties change things at will on an ongoing basis, even flaunting these laws.
          However, because they are government, legislation was changed so that if aNd when it happens since 2013, it automatically comes out next pay.

          We were never asked if we wanted it out next time when we brought it to their attention and we all thought it was corrected - as it looked like it. They have never provided calculations or proof. Yet they threaten legal action. All this harrassment must be costing a fortune.

        • bobbified on 06/04/2017 - 17:43

          @Rumbaar:
          haha - I get what you mean, but I'd rather be a bit more reasonable than that. I brought the overpayment to their attention and I was ready to pay it back.

          Someone has obviously screwed up and I'd prefer the person not get the sack over it if I be selfish and unreasonable.

          But they gave me the go ahead to keep it, so it worked out well anyway.

          Who knows - I might end up wanting a job with the same company again in the future, so it's not something that's worth burning bridges over.

      • bobbified on 06/04/2017 - 17:56
        +1

        Ha, you can't be overpaid. If that's the salary you're being paid, then that's it.

        Someone can't be "overpaid" if both employer and employer agree on an amount and then you actually get paid that amount.

        The "overpayment" is where the employer is paying a salary that's higher than what was agreed. For example, if you both agreed on a $50,000 salary and the HR person has fat fingers and types $55,000 into the payroll system, then you'll be overpaid.

  • [Deactivated] on 05/04/2017 - 12:24
    -8

    Most people actually negotiate a wage that is below the minimum wage.

    It is the only way they can be competitive for the lowest tier jobs. Otherwise they cannot compete in the labour market. They are almost always better off than on welfare.

    They do so because it is more comfortable for them. I know plenty of people working $8 an hour jobs at the local store where they just have to stand around with very few customers each day.

    The problem is the minimum wage, and not businesses deliberately underpaying. I wouldn't be surprised to see some of George's restauarants close down if they are unprofitable. It's the difference between giving someone a job and that job not actually existing due to the artificially high barriers of entry (minimum wage).

    Disclaimer:
    I voted for "Underpayment is almost always INTENTIONAL"

    I suspect around 70% of businesses engage in this kind of behaviour. A lot of the time the workers work more hours but declare less worked hours. That's how people can afford to get cheap products "Made in Australia". This is why I don't intentionally buy Australian because you don't know if they are actually playing by the same rules. At least you can say I bought a Chinese/Korean/Japanese product where they paid a good livable wage.

    • mskeggs on 05/04/2017 - 13:07
      +2

      This is why I don't intentionally buy Australian because you don't know if they are actually playing by the same rules. At least you can say I bought a Chinese/Korean/Japanese product where they paid a good livable wage.

      I presume you are trolling.
      There has always been cases of people working for cash or working off the books. Australia has a Fair Work Commission to investigate and prosecute this. In the past, we also had powerful unions that worked to stamp this out too.
      When you sell your labour less than the law says, your are advantaging the criminal business operator against the law abiding operator. If everybody pays correct wages then prices for some items might rise slightly, but there will still be the same number of staff required. Nobody employs unneeded employees now just because they can pay them below award.
      Arguing that lower pay means more jobs is only true where the pay is so low it is more cost effective to employ a person rather than a machine. Those are not the jobs we should be incentivising.

      • ChrisLevo on 06/04/2017 - 16:20
        -1

        Sorry!

        I meant to + you and hit the wrong one.

        I agree with what you said, but was too quick.

        I owe you a beer.

      • Scrooge McDuck on 07/04/2017 - 00:10

        If everybody pays correct wages then prices for some items might rise slightly, but there will still be the same number of staff required. Nobody employs unneeded employees now just because they can pay them below award.

        The award affects the payroll budget and the payroll budget is a key factor in determining whether a business can open or expand.

        • mskeggs on 07/04/2017 - 07:02

          Quite.
          And a business could take market share from those paying correct wages if it underpaid, but lower labour costs don't expand the addressable market. Quite the opposite, at a wide scale they shrink the customer base if they have less money to spend.
          It isn't a win for society if lower paying businesses displace higher paying ones as ultimately we support the poorest by increased taxes on the richest.

    • Emli on 06/04/2017 - 09:04

      Mmmmm…
      Clothing made in Cambodian where the workers are paid US$3 a day. Costs of living are low but not that low. Factory conditions in China????
      Very little of what I buy is made in Japan and Korea.

  • wallet72 on 05/04/2017 - 13:05

    In the recent case, the business was notified that there may be an issue. The business then launched an independent audit, at their expense. This audit took 2 years to work things out and get the right rulings. The audit found some employee classifications had been wrong and there was some over and under payments. 2.5+ years, 3 restaurants, multiple staff, $2.5m - not really that much considering the size of the3 business. And keep in mind this isn't a business that set out to screw people, there were issues with classifications that resulted in over and under payments - not a very smart screw job if people were overpaid.

    • outlander on 05/04/2017 - 15:09

      And keep in mind this isn't a business that set out to screw people, there were issues with classifications that resulted in over and under payments - not a very smart screw job if people were overpaid

      I'd be careful using that line of reasoning. Bad people, the smart ones anyhow, always know to do a few good things so they have something to cast doubt. Its why serial killers do things like volunteer

      and despite the number being thrown alot, a million dollars is not a small number. If you are running a business and lose track 2.5M, maybe you have too much money?

      • [Deactivated] on 06/04/2017 - 08:32

        Nobody 'lost track' of any money. Wallet72's explanation is clear and spot on.

        • outlander on 06/04/2017 - 11:34

          2 years, and nobody thought to conduct a salary review to ensure everything was accurate? How much profit was the owner taking in during this time?
          I know it can be hard being the person in charge, and mistakes happen, but realize that all the power lies with them, and with that power comes with the responsibility to act. It's hypercritical to take credit for the success, but shrug off failures as being simple mistakes.

          Wallet72's explanation is clear and spot on

          Well yay for wallet. It's clear from his analysis of the situation that he considers himself to be an invisible observer, separate from the situation at hand, and that the people involved would have acted the same whether he was there to see it or not.
          NEWSFLASH!
          People act differently when they are being watched. They do things, twist the facts, plant evidence, so that when they are judged, the results are tilted in their favor. I know in the movies bad people are always ugly with a permanent scowl, but here, in the real world, bad people hide behind beautiful faces and cheery smiles.

    • try2bhelpful on 05/04/2017 - 16:39

      2 years to work out if you are underpaying people is an awful lot of time for the people being underpaid. Will these people get interest on the money they weren't paid, will they get their super payments sorted out? Just how complicated are the wage systems? I guarantee if they were overpaying a lot of people that this would've been sorted well shy of 2 years.

    • try2bhelpful on 05/04/2017 - 16:40

      2 years to work out if you are underpaying people is an awful lot of time for the people being underpaid. Will these people get interest on the money they weren't paid, will they get their super payments sorted out? Just how complicated are the wage systems?

    • PVA on 06/04/2017 - 16:03

      Classifications maybe like classifying a chef as a kitchen hand or fast food staff because it's cheaper. That's crooked too.

  • outlander on 05/04/2017 - 15:05
    +3

    My instinct is that most of the time it's unintentionally intentional. The head of the company puts pressure on the personal below him, the pressure continues down in a game of chinese whispers and when it gets to the end the guy at the bottom is being stifled out of half his wage to boost profits.

    I don't believe this was a voluntary review either. Good chance the guy in charge was told by someone else to either front up or be exposed.

  • [Deactivated] on 05/04/2017 - 20:49

    I still fantasise about burning down the place that screwed me and the other 50 or so employees over, and continue to do so (I've moved on but the business continues healthily) to this day despite my attempts to bring the matter to FairWork's attention.

  • bemybubble on 05/04/2017 - 22:02
    +3

    As a business owner and operator people should understand this. Have you ever given any thought to how many awards there are out there and how easy it is to get it wrong?

    Here's an example. Did you know that if you run an Italian restaurant your pizza making staff are on the restaurant award. But as soon as you start involving pizza boxes or paper plates for takeway then your award completely changes to the fast food award?

    Not discounting the fact that there are people out there who deliberately rort their employees. But spare a thought for how complex and conduluded the system is and how hard it can be to get it right…

    • PVA on 06/04/2017 - 16:08

      I am sure people already understand this. You can get info from fwa or your accountant, you can even pay above the award and the amount of what's the higher award, it will only be a dollar or two an hour.

      • bemybubble on 06/04/2017 - 16:20
        +1

        As accountants we no longer advise clients on awards as we become equally as liable if we get it wrong (which is very easy to do) so we direct them to a 3rd party expert in the area.

        You're right though, you could go the higher amount to play it safe but if you multiply this by the amount of employees and add super and workcover into the mix it can become a costly safety net…

    • mihserus on 06/04/2017 - 16:27
      +1

      Isn't that why it's somebody's job be to on top of all the rules and regulations? As a business owner, if this isn't you, then surely it's your responsibility to find someone who is.

      While mistakes happen, I would've thought 'the system is too complicated' is a pretty weak excuse in this instance.

      • bemybubble on 06/04/2017 - 16:43
        +1

        Like I said, if you take my example above you can see how easily it is to make such mistakes. Weak has nothing to do with it. I do agree though that business owners need to be more cautious and hire the right help where necessary.

        But then I could go on about affordibility of such help which would open the doors to a whole new debating arena of workers vs employers.

    • Scrooge McDuck on 06/04/2017 - 23:59
      +1

      Here's an example. Did you know that if you run an Italian restaurant your pizza making staff are on the restaurant award. But as soon as you start involving pizza boxes or paper plates for takeway then your award completely changes to the fast food award?

      Avatar checks out.

  • blaxland36 on 06/04/2017 - 10:15

    I recognise the over paying perks and lurks of our pollies and the exorbitant ceo saleries that don't make headlines like the underpaying ones.

  • SuperMid on 06/04/2017 - 16:32

    to clarify for some: this applies more eg: for hospitality workers who fall into award categories. office staff on negotiable salaries, not applicable.

    • oztite on 06/04/2017 - 17:15

      It's interesting that unintentional/ intentional award abuse, "phoenix" tax scam, and tax free "cash economy" are all applicable to the restaurant industry… hmmm…

  • robbyjones on 06/04/2017 - 22:19

    There are lots of companies underpaying their employees, especially in hospitality, I would say that in the 'hypothetical case' mentioned by the OP it would most likely be in overtime and penalties.

  • Rashed on 07/04/2017 - 02:24

    Nearly 200 staff at George Calombaris' restaurants have been underpaid $2.6 million, with the celebrity chef blaming "historically poor processes" for the bungle.

  • dufflover on 07/04/2017 - 08:52

    I believe intentional, but to be fair don't forget the usual rule of statistics of being able to make anything sound like anything. Whether that's by being more selective with staff or stretching out the time period. (this is against the media, not shifting any responsibility away from the companies)

  • [Deactivated] on 07/04/2017 - 10:00

    You will never hear of overpay because no one will report it.

  • [Deactivated] on 07/04/2017 - 12:31

    Both overpay and underpay happen a lot. Some rules are complex and a lot of accountants are incompetent. I know one business who had to back-pay a heap of payroll tax, which, if they had been properly advised, they would not have even been liable for (found in an internal review, and the accountant was surprised when they no longer kept the job….)

    I personally know of several occasions where I have been overpaid unintentionally. Also keep in mind that many businesses pay well above the award already, so the fact that they're overpaying is by design, not accident.

    Of course I've also been deliberately underpaid, by a large multinational who intentionally clocked me off earlier than I actually finished (this was decades ago). Always good to find you've worked the last hour for free. Young people are exploited commonly, by managers who aren't much older and don't realise just how much trouble they will get in if anyone calls them on it.

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