Why are large businesses still failing to pay their employees correctly?

Despite consistent warnings in the form of very public underpayment scandals, large businesses are still being found to be underpaying their employees in a variety of ways.

Is it because they are cutting costs, or is it just really so difficult to pay employees correctly?

The two most recent examples of alleged underpayments have involved two of the most recognisable brands in Australia, being the Commonwealth Bank (CBA) and McDonald’s. The most interesting thing about these alleged underpayments is that they are occurring in different ways from how we have usually seen large-scale underpayments take place.

The CBA and Long Service Leave Entitlements

The CBA has been accused of failing to pay more than $70,000 in long service leave payments to 20 former employees. The Victorian Wage Inspectorate filed charges against the CBA for not only the underpayments, but also for failing to provide requested documentation for the investigation.

The CBA has said underpayment of staff is unacceptable and that they have been cooperative with the Wage Inspectorate’s investigation.

McDonald’s Rest Pause Problems

The Shop, Distributive and Allied Employees’ Association (SDA) has alleged that McDonald’s has underpaid employees by at least $250 million. These alleged underpayments relate to over 250,000 current and former employees being denied their paid rest breaks.

Allegedly, workers were told that if they wanted a bathroom or drink break, they were unable to then also take a rest break, essentially denying them their paid rest breaks that they were entitled to, where they worked 4 hours or more.

Coincidently, in early 2022 the CBA also had issues with breaks, with the Financial Services Union alleging that workers hadn’t been allowed to take their breaks, which consequently cost the CBA $45 million to resolve.

Why are these problems happening?

There are a number of reasons why these issues could be occurring within businesses that one might assume would be well positioned to avoid these types of problems arising.

A lack of understanding of the different employment laws within respective states could be one cause of these issues, particularly for the long service leave issue.

The conditions for long service leave differ from state to state in regards to the length of service and how it is calculated. Typically, employees are entitled to long service leave accruals after 10 years of continuous work, however in Victoria and ACT it is only 7 years, and in some situations 5 years in NSW.

Without proper employment compliance education through a network, misunderstandings can arise and some people might assume that all states dictate that long service leave is only accessible after 10 years of continuous work.

Education could also impact the rest pause problems. McDonald’s is franchised and will have less direct control over franchisees and their managers than in their corporate stores. This should put more focus on education, as managers and franchisees often have little or no prior training on employment compliance.

According to the SDA, the alleged issue for McDonald’s was that franchisees only allowed employees to take either a toilet/drink break or their rest pause, which then could have been a misunderstanding throughout the whole network.

Need any more assistance?

Whilst only seeming like relatively small matters, long service leave and rest pauses can create significant issues for employers, and if they do it could possibly indicate deeper compliance concerns within the particular business.

ER Strategies provides assistance to all client businesses, from franchises to small operators, to assist in managing their employment compliance, including the training of owners, franchisees, and managers via our Employment Compliance training (ECT) Academy, for example.

If you need some help, get in contact with us here, or give us a call on 1300 55 66 37.

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