The five red flags of wage non-compliance

compliance checklist

From JDSupra, Lauren Crossman and Chris Gardner offer their insights into red flags that might indicate non-compliance with wage and hour laws. Laurena nd Chris write:

Many in our readership will have embarked (or are embarking) upon a compliance audit of workplace entitlements. Anyone who has done so will appreciate the difficulties associated with what becomes a massive and complex task. The future will see monthly pay reviews as a matter of course rather than large and costly remediation processes.

Indeed, a whole industry has been built crunching the numbers on wage/time and attendance compliance. With the Federal Government promising criminal sanctions for “wage theft”, the industry will only grow.

We recently spoke to Marcus Zeltzer, Co-Founder of Yellow Canary. Yellow Canary is a compliance provider unique in its investment in automation, reducing the lower value yet expensive grunt work associated with never-ending pay compliance review projects.

Yellow Canary has identified five red flags that signal potential non-compliance:

  1. Paying an annualised salary vs. modern awards entitlements (all-in rate): An annualised salary arrangement without monitoring is fraught. There’s no longer a place for “set and forget” as many an FWO investigation has made very public.
  2. Changes in payroll system: Especially in business acquisition scenarios, which can create confusion and added complexity. Compliance issues can arise when pay codes don’t align between the systems and when there is a lack of understanding within the business as to the correct pay codes to apply under the new system. Underpayments can also be triggered if historical data isn’t transferred across correctly.
  3. Self-claim systems: These assume that employees have sufficient knowledge of their entitlements. If misused, this can result in a snowball effect of unintended compliance consequences.
  4. No recent classification review: Employees’ job titles and their job duties regularly evolve. If a classification review hasn’t been conducted recently, there is a high chance that employees aren’t classified in line with the underlying Modern Award and, therefore, could be underpaid.
  5. Call centres: Where, in the words of Marcus, “a lack of compliance is almost guaranteed“. Employees in call centres often work outside the regular 9-5, are often called in on weekends, and work longer hours due to seasonal campaigns like Christmas or during elections. This, in turn, triggers overtime, higher rates of pay or shift penalties. These scenarios may not be immediately obvious for an employer with a majority 9-5 workforce.

Perhaps Marcus’ most disconcerting observation: for one Modern Award, the General Retail Industry Award, Yellow Canary has been provided with more than 125 different interpretations by different employers. We are not surprised. We are often called upon to provide the “rule book” on interpretations of Modern Awards. Much of what we are asked to resolve concerns interpretation ambiguities. The “wage-theft” media commentary would have us believe that compliance is straightforward. It certainly should be. But it’s clearly not.

Source: The five red flags of wage non-compliance | Seyfarth Shaw LLP – JDSupra

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