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Paying the penalty: cheap labour could be an own goal

30 July 2013

Pay talks can be a manager's worst nightmare. Consider a recent case launched by the Fair Work Ombudsman against a media production company.

In the case, the ombudsman alleges the company failed to pay one Producer for seven months' work. Another Producer was paid just $2940 for more than a year's work – well short of the $19,000 he should have received.

The company is facing some serious fines for multiple offences, with each offence carrying a penalty between $16,500 and $51,000. Some well-judged pay negotiations might have prevented this high-profile drama.

The case piggybacks on recent controversy around unpaid interns and a report from the University of Adelaide into increased rates of unpaid work experience, in contravention of the Fair Work Act. Under the Act, workers must be paid for work completed that is not linked to an educational or training program.

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Determining rates of pay can be a tricky process. For most roles, there are legislative requirements around minimum rates of pay and various entitlements. Determining the right pay rate often calls for a complex negotiation that factors in market rates, the individual's experience, the seniority of the role and any number of other organisation- and role-specific factors. For some organisations, HR consulting firms may offer an industry-wide perspective that can help to get the salary right. Consultants can also offer guidance on how to structure total remuneration packages and how best to negotiate a salary that suits employee and employer.

Organisations can find themselves with outdated salary banding or performance related pay structures that have been improvised and may not be clear and fair to all employees. This can present a risk to the organisation and HR consulting firms can help to get an organisation back on track by offering a holistic service which can include redesigning salary banding, increments and related performance appraisal systems.

For employers who use Awards and Enterprise Agreements, it can be difficult to stay up to date when Award rates are amended or to ensure that Enterprise Agreements are keeping up with the Better Off Overall Test (BOOT). iHR Australia can provide assistance with contracts and Enterprise Agreements, including negotiations with employees and unions.

Pay rates play an important role in how successfully an organisation can attract and retain the best employees. It is well worth ensuring your salary structure fulfils your legal obligations and helps you to hang on to your top performers.

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