Faulty payroll system costs employer more than $7 million

Find out how you can avoid a multimillion-dollar mistake by checking your systems regularly

Faulty payroll system costs employer more than $7 million

An employer has dealt with a hefty compensation claim after failing to ensure proper systems were in place.

Incorrect assessments, payroll system errors and process issues contributed to the company’s failure to pay its employees what they were due, resulting in more than $7 million in underpayment.

South East Queensland’s water supplier, Seqwater, has been ordered to back-pay its staff the monstrous sum and has entered into an enforceable undertaking (EU) with the Fair Work Ombudsman (FWO), according to a press release.

Following media reports alleging underpayment, the FWO launched an investigation into the Queensland government's statutory authority in 2020.

Seqwater informed the FWO that it was conducting a review to see if it had underpaid employees due to recommendations from industrial relations experts. Seqwater determined that hundreds of its employees, through the years, were underpaid for different entitlements under the organisation's enterprise agreements.

Many employees were underpaid because of Seqwater's "incorrect determination" that since they were covered by individual contracts rather than enterprise agreements, they were not included in receiving the entitlements mentioned in those agreements. Underpayments were also a result of "payroll system errors" and "process issues."

The underpayments involved overtime pay; travel, on-call and call-back allowances; remote assistance allowance; leave loading and ordinary hourly rates. The FWO also found that the employer breached record-keeping and pay slip laws.

According to the press release, FWO Sandra Parker said that an EU was “appropriate” because Seqwater had shown “a strong commitment to rectifying underpayments and to ensuring future compliance.”

“Under the enforceable undertaking, Seqwater has committed to implementing stringent measures to ensure workers are being paid correctly. These measures include engaging, at the organisation’s own cost, audits of its compliance with workplace laws over the next two years,” Parker said. “Seqwater’s breaches and subsequent significant back-pay bill demonstrate how important it is for employers to place a high priority on workplace compliance, including having a clear understanding of how any enterprise agreements apply and performing regular checks to ensure they are providing employees with all lawful entitlements.”

The conditions under the EU

In addition to rectifying all underpayments, the employer is required to:

  • engage an independent expert to review its underpayment rectification process and provide the report to FWO
  • publish media, social media, website and workplace notices detailing its workplace law breaches
  • operate a hotline for employees to enquire about their wages and entitlements for 12 months
  • apologise to workers and unions
  • and provide evidence that it has developed systems and processes for ensuring compliance into the future

The affected employees performed various administrative, technical and professional roles, including administration and project officers, technical specialists, scientists, engineers, maintenance coordinators and schedulers, field rangers, and dam operations and water treatment officers.

The FWO said that further underpayments “are still being quantified” and the EU requires Seqwater to back-pay all underpaid employees by February 2023.

The underpaid employees performed work in Brisbane and at locations across South East Queensland, including Capalaba, Molendinar, Wyaralong, Ipswich, Mt Crosby, Kilcoy, Banksia Beach, Caboolture, and Noosa.

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