Insights / April 2nd, 2024

FWO’s Focus on Payroll Compliance in the Aged Care Sector

The Fair Work Ombudsman (“FWO”) continues to focus on investigating and enforcing non-compliance with workplace laws, in particular, underpayments of wages and entitlements.

Over the last two financial years, the FWO has recovered nearly $1 billion in unpaid wages and entitlements.

As part of the FWO’s increased compliance efforts, the aged care sector was identified as a regulatory priority for the FWO in 2023 – 2024.

In this insight, we explore three recent examples of payroll compliance issues that have arisen in the Australian aged care sector.

(1) Calvary Administration Pty Ltd

In late 2023, the FWO announced that it had entered into an Enforceable Undertaking (“EU”) with aged care services provider, Calvary Administration Pty Ltd (“Calvary”), to resolve a significant underpayment.

Calvary had self-disclosed more than $2.1 million in underpaid wages between April 2018 and May 2020.

The underpayments were mainly caused by an incorrect penalty rate being applied to ordinary hours worked on Sundays. This error arose due to an external payroll provider incorrectly setting up Calvary’s payroll system with a 150% penalty rate instead of 160% (as required by the applicable enterprise agreement).

Calvary committed to (amongst other things) back-paying the affected employees, making a contrition payment of $10,000 to the Commonwealth and implementing – at its own cost – an independent audit regime to ensure continued compliance over the next two years.

This all meant that Calvary avoided facing formal Court proceedings.

Courts are at liberty to impose significant financial penalties on employers who underpay their employees, currently set at $93,000 per breach by a body corporate and $18,780 per breach by an individual involved in a contravention. These figures are subject to a ten-fold increase if a contravention is considered “serious”.

(2) Southern Cross Care (Tasmania) Inc

Tasmania’s largest residential aged care operator, Southern Cross Care (Tasmania) Inc (“Southern Cross Care”), entered into an EU in September 2023 as a result of discovering that it had underpaid approximately 1,700 former and current employees the total amount of $6.87 million (comprising wages, entitlements, superannuation and interest).

The underpayment arose due to Southern Cross Care failing to comply with the overtime, penalty rates and allowance provisions of the four enterprise agreements that covered its operations, as well as the Social, Community, Home Care and Disability Services Industry Award 2010.

Specifically, Southern Cross Care’s errors included a failure to pay overtime rates to part-time employees for hours worked outside of their agreed hours of work, and failure to pay overtime rates when employees were not provided with unpaid meal breaks. Most underpaid employees were part-time aged care workers, nurses and community care workers who performed shift work.

These issues were self-reported to the FWO in August 2021. The FWO determined that an EU was appropriate in the circumstances, which involved Southern Cross Care committing to rectifying the issues, including by back-paying all relevant employees plus interest and taking measures to avoid future non-compliance, which will involve overhauling its payroll systems and processes.

The FWO, Anna Booth, commented that: “This matter demonstrates how important it is for employers to place a high priority on their workplace obligations. Fundamental errors – including failing to ensure that written agreements with part-time employees were in place – were left unchecked, which led to long-term breaches and a substantial back-payment bill.”

(3) Uniting AgeWell Limited

In May 2023, aged care services provider Uniting AgeWell Limited (“Uniting AgeWell”) signed an EU with the FWO in respect of an underpayment of 4,971 employees amounting to more than $3.5 million plus interest and superannuation between 2015 – 2021.

The underpayments arose due to Uniting AgeWell’s incorrect interpretation of the relevant enterprise agreements, complicated rostering arrangements and failure to pay the correct penalties and allowances (including shift allowances). Failure to pay overtime rates contributed significantly to the underpayments, where employees had not received an adequate rest period between shifts, or had worked more than 76 hours in a fortnight.

By agreement with the FWO, Uniting AgeWell agreed to repay the underpayments, and conduct, at its own cost, an independent audit to monitor ongoing compliance with workplace laws, as well as providing training to relevant staff.

Due to the employer’s cooperation with the FWO in its investigation and commitment to rectifying underpayments and reforming its practices, it has avoided litigation.

Key takeaways

Workplaces in the aged care industry are often navigating complex awards or enterprise agreements, which can too easily lead to payroll issues resulting in underpayments and associated liability (including civil/criminal penalties).

The above cases illustrate that:

  • Correctly interpreting workplace instruments is central to ensuring payroll compliance.

  • In the aged care industry, particular care should be taken to ensure allowances, shift penalties and other loadings are correctly applied, and part-time employees are rostered and paid strictly accordance with the requirements of the relevant instrument.

  • Small payroll errors can lead to a large financial liability, and can quickly escalate the longer they are left unnoticed.

  • If a payroll error is identified, early intervention and active cooperation with the regulator can assist with obtaining more favourable outcomes and reduce the chance of facing Court (we recommend seeking advice before making any self-initiated disclosure).

Our Dispute Resolution Team is here to offer you expert advice and support for any questions or issues you may have regarding your payroll compliance. Please contact, , for further information.

This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.