Mining company hits $2 million hole in payroll.November 17, 2016
A Victorian mining company has stumbled into one of the largest payouts in the Fair Work Ombudsman’s history. The Ombudsman ruled that Deepcore Australia underpaid 205 employees across regional Victoria and Queensland a total of $2.09 million.
What makes this story significant is not just the size of the payout: it’s that this massive liability arose from one simple mistake.
How did this happen?
Fairwork Ombudsman inspectors found that DeepCore failed to correctly calculate allowances and penalty rates under the Mining Industry Award. Specifically:
- DeepCore didn’t pay the all-purpose allowance correctly
- They failed to pay the right night shift and weekend penalty rates.
Now, Deepcore is not another 7-11, systematically doctoring their books to hide the underpayment. Deepcore has admitted the error, and has already made more than $1 million in backpayments, and given a raft of other undertakings.
Deepcore blames the error on bad accounting advice, including misunderstanding transitional arrangements to modern awards. They’d counted on their accounting team to stay on top of award interpretation, and unfortunately in this case, they’d been let down.
In a way, that makes DeepCore’s experience even more alarming. You rely on our financial team to have award interpretation under control. You may not always have the time or level of technical knowledge ourselves to check the advice.
How to step around the hole
There are two simple questions you can ask your accounting team to inform yourself of your risk exposure, and gauge how well they’re dealing with industry awards.
1) What systems are in place to automatically update payroll when the industry award changes.
Automation is the key to minimising your risk. Even if your staff regularly check the award, there’s still the potential for human error as they manually transfer the data into your system. And what happens if they go on leave, or leave your business, and don’t hand on this duty to their replacement?
Small errors can creep in, which rapidly add up across your workforce.
2) Are penalty rates calculated on staff’s duties or substantive positions?
When easyEMPLOYER is conducting workplace healthchecks, we often encounter this error. Businesses mistakenly apply penalty rates multipliers to the job staff members own, rather than the role they filled on a given shift.
We covered this scenario in more detail here.
Why not make a reminder to talk to your accounting or HR team, and ask them these two simple questions.
And we’d be glad to hear what you found. You can reach us here.