By Ryan Martin, Director, Workplace Relations

One of a head chef’s primary duties in a fine dining restaurant is quality control.

Like the conductor of an orchestra, the head chef will arrange for any number of stations to deliver several different dishes at the same time to ‘the pass’, scrutinising each one to ensure it meets his or her exacting standard before they hit the  customers’ tables.

So, if one of Australia’s most successful chefs cannot replicate this attention to detail to ensure that the wages of his staff have been correctly paid, what hope do the rest of us have?

While George Calombaris’ situation is extreme and vastly different to the many small businesses that are struggling to pay their own bills and mortgages, it puts a magnifying glass on the common issue of underpayment.

It also highlights that even if you employ managers, if they do not understand the industrial relations laws and awards, it is the owner of the business who will ultimately face the hefty penalties and blame when things go awry.

Without making excuses for Mr Calombaris – $7.8 million is a heck of an oversight – just try to give him the benefit of the doubt (even if just for a few minutes to read this article)  that he did not deliberately underpay his staff in a calculated and wilful effort to exploit those workers.

Why? Because accidental underpayments happen very regularly, usually just on a much smaller scale. 

Mr Calombaris’ underpayment amount was so high because it was spread over nine venues, 524 employees and a period of six years. His company also self-reported the underpayments to the Fair Work Ombudsman and had back paid all employees prior to the Enforceable Undertaking being executed. 

The industrial relations laws in Australia can be incredibly complex and most small or medium sized businesses are working hard on winning work, hiring people to help with that work, growing their business and generally just getting on with things.

This, however, is not a reasonable excuse. If you do not have time to educate yourself or cannot afford to outsource the work to someone who can ensure your staff are being paid correctly then you should not start a business that requires employees.

As an employer in the hospitality industry you would certainly ensure you can afford the premises, equipment, produce, alcohol and other necessities before opening a restaurant, so why wouldn’t you take the time to do your due diligence on what your biggest asset and cost will be – the employees.

Before opening day you would have a good idea of what your opening hours are likely to be and thought about how many employees will be needed and what shifts are going to be required to ensure you have enough staff for any given service.

The modern award with minimum wage rates, allowances and other entitlements are easily accessible, making it fairly straight forward to work out how much you need to pay employees.

That’s if you have an accounting or human resources degree. 

But if you don’t, once you start trying to work out what shift rates apply, which allowances need to be paid and how much overtime or other penalty rates on weekends or public holidays you will be up for, it all becomes much more difficult to predict and budget for.

As a consequence, what a lot of businesses will do is try to pay a flat rate or annualised salary – which is intended to offset or satisfy all of those potential penalty rates and allowances into one set and predictable hourly rate.

While very beneficial if done properly, it can be fraught with danger and most likely where Mr Calombaris was caught out.

If you do not calculate these flat rates correctly for every employee’s individual circumstances or if you do not conduct annual reconciliations to ensure that workers have not been underpaid you create a risk that you are underpaying some or all of your workforce, which over time can create a significant amount of liability.

So while you may have had no intention to underpay your staff, if you have not taken adequate steps to ensure that you have correctly classified your employees and worked out their entitlements and penalty rates, you will be exposed to penalties.

Going forward, the $200,000 fine that Mr Calombaris received could just be the tip of the iceberg, as the Minister for Industrial Relations, Christian Porter, has flagged changes to workplace laws that will criminalise worker exploitation. This means underpayments, whether deliberate or not, could potentially lead to much more significant penalties or even jail time.

A regular audit of your wage rates can assist to protect you if you have tried to set up a flat rate or annualised salaries for your staff.

Going back and ensuring that an employee’s circumstances have not changed since you originally calculated their rates, for example they have changed classification under the award or started working Sundays regularly will ensure your staff are being paid correctly, or give you the chance to rectify any unintentional underpayments as promptly as possible.

► Concerned about underpayments? Contact CCIWA’s Employee Relations Advice Centre on (08) 90365 7660 or visit cciwa.com.