Katrina Murphy – Talking about
Industrial Relations
In this regular column, our resident industrial
relations expert, Katrina Murphy will answer questions
on employment, employee relations and Industrial
Relations topics. In this article, we look at common
myths about wages.
Deducting the cost of errors and damages from
wages
Q: We have employed a new casual employee in
our coffee shop. We want to give him a go, but he is
inexperienced and a bit clumsy. He has broken many
cups. His daily cash float is often out by ten or twenty
dollars. We think he would be more careful if the cost of
the breakages and the float discrepancy was deducted
from his pay. He says he thinks this is reasonable and is
happy to sign something. Can I do this?
A: No, you cannot. Fair Work Act makes it clear that
employers cannot make deductions from wages even
if the employee signs an agreement, except in very
specific circumstances. Those circumstances must be
where the deduction directly benefits the employee,
such as a salary sacrifice for health insurance. The
permitted circumstances do not include compensating
for breakages or “unders” in the daily cash float, even if
that meant you kept him in a job. “Directly benefits the
employee” does not include a deduction for a uniform
or for tools that are required to perform their work.
Deducting an overpayment from an employee’s
wages
Q: We have recently changed payroll systems. During
the changeover, we overpaid a staff member $1,100. My
view is that she should have noticed the error and let us
know. She did not. Therefore, we believe we are within
our rights to deduct the entire amount from her next
pay.
A: The employer has no automatic right to deduct an
overpayment from an employee’s pay, even if it is in
their contract. The only exception is where there is
a term in their enterprise agreement which permits
deductions where an overpayment has occurred. It is
the responsibility of employers to ensure that wages are
correct. It is not the responsibility of the employee to
check this.
You must seek to reach a written agreement with
her on return of the overpayment. Usually this is done
in installments. The employee must not be coerced or
threatened into making such an agreement.
Product discounts instead of penalty rates
Q: We are a cash-poor start up business. Especially
in the first eight weeks, we need to have our new
supervisor working about 45 hours per week. We are
paying her the correct award weekly wage. We cannot
afford to pay her overtime for the hours she works over
38 each week. We also can’t afford penalty rates for her
weekend and night work.
Can we make an arrangement with her, just for the
first eight weeks, that we will offer her an uncapped
50% discount on all our products instead of paying her
the seven hours overtime? We have told her we really
want to keep her in a job, and she is keen. She says she
loves our products and would be happy do this, if this
means she can keep her job.
If we can’t do this, can we say that her weekly wage
is a salary and therefore covers all of her hours worked
including reasonable overtime?
A: It can be a struggle when you start a small business.
Your business planning must include having enough
money in your budget to pay the correct wages if
employees are required to work long hours and/or
penalty rates. You must pay the correct wages. A
discount deal on products or any “in kind” products
cannot be used as a substitute for wages. It is also
important that you do not breach Fair Work Act by
seeking to coerce the employee to agree to something
unlawful because she fears losing her job if she does not
agree. You can use staff discounts on products or the
occasional gift of Company products as an incentive or
thank you for great performance.
You cannot describe her weekly wage as a salary
which covers all additional reasonable overtime unless
1. The relevant award permits salary arrangements
and
2. The fixed salary you are giving her is high enough
such that she is better off under this salary than
if she was getting the applicable award wage,
overtime and penalties. It is clear from your
description that you are only paying the award rate,
therefore this will not be enough to compensate for
her loss of overtime and penalty benefits.
By Katrina Murphy. Managing Director Katrina Murphy
Industrial Relations Pty Ltd.
Winter 2019 71