An underpayment is the act of not paying someone what they are entitled to. Depending on your workplace, this can mean being paid less than you are entitled to under your relevant agreement or award, or less that the national minimum wage.
Not paying entitlements such as superannuation or penalty rates is also a form of underpayment. If you feel your current or former employer has underpaid you by:
- Not paying you at the correct award rate
- Not paying your superannuation
- Not paying the correct notice upon termination of your employment
- Not paying you penalty rates or the incorrect rate
- Not paying you allowances or other loadings
- Not paying out your long service leave or annual leave entitlements correctly
- Not paying the correct amount of redundancy pay
1. Figuring out your entitlements
You will need to find out the wage to which you are legally entitled. This will either be set out in a Modern Award, in your contract of employment or in an enterprise bargaining agreement. These are explained below. All employees, as a minimum, are entitled to the National Employment Standards.
The National Employment Standards set out the 10 minimum employment entitlements that must be provided to all employees, including the national minimum wage, and other entitlements such as leave, and flexible working arrangements. Casuals and permanent employees have different entitlements.
- Modern awards
Most employees are covered by an award. An award is a legal document that sets out the minimum pay rates and conditions of employment for a particular industry. Awards are not specific to your employer but rather specific to your industry/sector. There are currently 121 modern awards in Australia. The Fair Work Commission sets the conditions and rates found in the modern awards. The Fair Work Commission reviews all awards every 4 years.
The Fair Work Ombudsman has The Pay and Conditions Tool which will enable to you work out the right award and other minimum pay rates. You can access this here.
You can find copies of all available awards on the Fair Work Commission's website. - Enterprise Agreements
An enterprise agreement is between one or more national system employers and their employees, as specified in the agreement. Enterprise agreements are negotiated by the parties through collective bargaining in good faith, primarily at the enterprise level. Under the Fair Work Act 2009, an enterprise can mean any kind of business, activity, project or undertaking.
They set out minimum employment conditions for employees of an employer. The law states that an EBA must leave an employee better off overall when compared to the relevant award. EBAs are voted on by the workforce and there should be a copy of your EBA made available to you, if one applies.
If your workplace has an EBA, you should check it first to find the wage to which you are entitled. Some agreements state that the award doesn’t apply, and provide better entitlements than the award. The base pay rate in the agreement can’t be less than the base pay rate in the award and the National Employment Standards still apply.
Other agreements may say that the award applies, where the agreement does not include detail about your entitlements. In this case, refer to your award.
You can find an enterprise agreement here.
Examine your records (payslips, bank statements, cash receipts, rosters) and figure out how much you were paid. Then compare what you were paid to how much you should have been paid for the hours you worked under the award or your workplace’s registered agreement. The difference in these two figures is the amount you can claim as an underpayment.
You can create an Excel spreadsheet to calculate an underpayment per pay period. If you are unsure of your exact hours, you can use a reasonable estimate.
2. Negotiating with your employer
You should raise any underpayment with your employer as soon as you become aware. If your employer is cooperative, this is the easiest way to rectify the underpayment.
If your employer refuses to pay you what is owed, then you can send a Letter of Demand. This is a formal request to be paid an outstanding debt. This includes a warning that legal action through either the relevant state tribunal or court (Federal Circuit Court) will be taken if the money is not paid by the date nominated. It should list the amount you are owed and also an explanation on why you think you are owed these amount, with reference to the correct rate. Attach your calculations as well.
Here is an example you can use to formulate your own Letter of Demand:
Dear Mr ____,
I write regarding my employment with ____. I have been underpaid by you as follows:
- Underpayment of wages: $1,000
- Underpayment of superannuation: $1045
- Unpaid annual leave: $1164
- Unpaid notice: $320.14
You did not pay me at the correct award rate. For the period of 15 September 2018 to 27 December 2018, you paid me $15 an hour. However I should have been paid at Level 3 of the Restaurant Industry Award 2010, as my duties included working in the bar serving alcohol, and helping to train and supervise junior staff. The total amount owing for underpayment of wages is $1,000.
When you dismissed me on 30 July 2019, you did not pay me notice. You owe me one weeks’ notice which is $320.14. My entitlement to notice can be found in the National Employment Standards.
You also did not pay out my annual leave of 3 weeks. The total owing to me for annual leave is $1164. My entitlement to annual leave can be found in the National Employment Standards. The total amount that should have been paid to me was $3,529.14.
You paid me $1,872.55. There is a total amount of $1,656.59 owing to me. I request that you make the total payment of $1,656.59 to me within 14 days of this letter.
If I do not receive payment within that time, I put you on notice that I will be commencing proceedings for unpaid wages against you in the ____ (enter your state) Employment Tribunal without further notice.
If I am forced to commence proceedings against you, I will be seeking an order from the ___ (state tribunal) that you pay pecuniary penalties for your various breaches of the civil remedy provisions of the Fair Work Act.
I look forward to a quick and amicable settlement of the outstanding unpaid wages.
Regards,
______
3. Getting your union involved
If your employer still won't pay you what is owed and you need support from our team, you can complete a member support form through your member dashboard and we will assign a case manager to assist with your matter. Please follow these steps:
- Log in to your member dashboard
- Click on "Member Support Form"
- Complete the form and a member of our friendly team will be in touch within 24 business hours.
Can I refuse to work if I have been underpaid?
No, if you refuse to work because you have been underpaid, this would be a breach of your contractual obligations and you may be liable for disciplinary action.
Are there penalties for underpayments?
Yes, the Court may order penalties if provisions of the Fair Work Act 2009 or other legislation have been breached.
How far back can I claim underpayment of wages?
You only have 6 years to claim in a court for unpaid entitlements. If you do not take action in a court to recover the unpaid wages or entitlements during that time, you will lose the right to claim entirely.
How long does an employer have to correct an underpayment?
Ideally, your employer should rectify the underpayment and arrange a backpay as soon as they have become aware of it. They may add it onto the next pay cycle. In certain circumstances, it may not be practicable to pay it all back immediately so the employer and employee may agree on a payment plan in writing.
*Please note that this is general information & may not be relevant to your particular matter. This should not be taken as legal advice.