Wage Theft Laws Commence Victoria 1 July 2021

New wage theft laws will commence in Victoria on 1 July 2021 exposing employers to fines of nearly $1M for businesses, and nearly $200K or up to 10 years jail for individuals for:

• deliberately underpaying employees;

• dishonestly withholding entitlements (eg allowances, leave, superannuation etc); or

• failing to keep proper records in order to gain a financial advantage

Whilst most businesses would be fairly confident they won’t ‘fall foul’ of the first two elements, it is the third element dealing with keeping proper records under the Fair Work Act which may cause issues, particularly in relation to records for salaried employees.Rather than strict compliance with the Fair Work Act record keeping obligations, this crime has the additional element of demonstrating the conduct was to deliberately gain a financial advantage –that is, much more than merely inadvertence. The devil will be in the detail –and one which we would like to think you can avoid by simply addressing a few key compliance steps in the key risk area of salaried employees.

The Fair Work Regulations require employers to record the overtime hours for employees that are entitled to a loading for overtime or penalty rate (i.e. most award or EA covered employees). The crux of the problem has been the ‘set and forget’ salary in the contract where there is no ongoing review to check that the salary is absorbing all the overtime, penalty rates and allowances.

Filling in daily timesheets and flexibility are not natural partners. However, the bottom line is that if you don’t have a record of the hours the employees have worked, your chances of defending an underpayment claim are dramatically weaker.

So, are timesheets now an essential component of the employment framework? The answer is still, probably “Yes”, but... there may be options in the way the system works. We recommend you consider the following based on your own operational risk profile. We have ordered these in from heaviest administrative burden compliance to least.

Option 1: Adopting the Fair Work Commission’s annualised wage agreement (assuming the applicable Award has this clause). The burden of having to precisely set out the parameters ofthe remuneration and conduct the annual reconciliation means that there is little time or convenience benefits about this approach.

Option 2: Going back to timesheets completed by the employee and having them being signed off by a manager, but this won’t be popular with staff or managers.

Option 3: Set some default hours and give staff the option at the end of each pay period to say whether they have or have not worked those hours. If the employee agrees (or does not raise any objections prior to) then theemployer can file that away as part of its time and wages record. This doesn’t escape that some extra administrative work is required.

Option 4: Build compliance into any future payroll system upgrades. This approach would rely on default presumptions and the requirement for the employee to deal with exceptions.Such a system has not yet been tested by FWC but it remains a worthy consideration.

Regardless of which option you take, ‘do nothing’ is not an option.