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The $90,000 wage mistake: Lessons for every employer

Finding the right minimum pay rate for employees can be tough, but the penalties for getting it wrong can be much, much tougher.

Just ask the two doctors who run the 'Medical Centre 2000' in Sydney's Liverpool. Last month their practice was fined almost $90,000 - and each of the doctors personally fined almost $9000 - for underpaying their receptionist and failing to provide her with proper payslips. This case is a wake-up call for every Australian employer.

This sorry tale began in early 2010 when the employee, a teenager with a diagnosed disability, was employed on a part-time basis to work on weekday afternoons and on Saturdays to assist the clinic's other reception staff. Initially, the employee was paid just $7.00 per hour, though this was gradually increased to $8.00 per hour over the course of her two years of employment.

During this same period of time, the actual minimum wage that should have been paid changed no less than 5 times. Yes, 5 changes in just 2 years. While this in no way excuses the significant underpayments in this case, it does highlight the difficulty most employers experience when trying to confirm the right wage for their own employees.

In fact, it wasn't just this employee's minimum wage entitlements that changed, the source of those entitlements changed too. So complex were all these changes that the Federal Court judgement even included a table summarising them all in chronological order. It shows that between 2010 and 2012, the employee's entitlements were derived first from the 'Clerical Pay Scale', then the 'Training Pay Scale' and finally from the 'Health Professionals and Support Services Award 2010'.

For any of you that have struggled to find the right Award for your employees - let alone calculate the correct rate of pay - this tale of woe may sound all too familiar. In most parts of the developed world, employers can simply look up the minimum pay rate online - or call the relevant government department - and obtain a clear, reliable and definitive answer. Here in Australia, with our 122 Modern Awards and seemingly incomprehensible 'transitional provisions', it's a very different story.

For the doctors running Medical Centre 2000 though, the underpayment of the base wage was just the beginning. They also failed to:

> Pay weekend penalty rates: (penalty imposed: $6,600)

> Pay overtime rates (penalty imposed: $6,600)

> Pay out their employee's annual leave balance upon her resignation (penalty imposed: $6,600)

> Pay annual leave loading (penalty imposed: $6,600)

> Pay for time spent training (penalty imposed: $10,000)

> Pay for public holidays and public holiday penalty rates (penalty imposed: $13,200)

> Pay for personal/carer's leave (penalty imposed: $6,600)

> Provide payslips (penalty imposed: $8,250)

And, in additional to all these penalties against the medical practice, separate personal penalties for each breach were imposed against the two doctors - it's enough to make you feel sick (if you'll pardon the pun).

Moral of this story: taking the time to carefully check your employees' entitlements - and obtain expert advice - might just save you from crippling fines and even the loss of your business.

Read article on Switzer News

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