Relationship with your employees – make sure that it is in writing from the start

Posted by Luke Mitchell on 07 June 2017
Relationship with your employees – make sure that it is in writing from the start

For many businesses, especially small businesses, the administrative tasks that come with employing staff can seem too much.  Often little more than basic contact, bank account and tax file numbers are recorded at the outset of the employment relationship. Sometimes there is also a vaguely recorded “agreed” salary or hourly rate.

Typically when dealing with good employees, this sort of arrangement does not cause the employer any great difficulties. However, in the case of a problem employee, or where a business simply gets it wrong in terms of what its employees should be paid, the failure to properly record the terms of employment can create serious consequences.

The recent high profile 7-Eleven and George Calombaris underpayment of wages situations highlight the disastrous impact, from both a financial and reputational perspective, that getting the employment relationship wrong can have on a business.

We recently assisted a business with an underpayment of wages claim made by one of its employees. Our client employed a considerable workforce, but did not have sufficient measures in place to properly document what had been agreed to in terms of what this particular employee (and the rest of its work force) would be paid.

In short, the agreement that was reached at the outset of the employment was that the employee would receive an annualised salary as compensation for all hours worked. About one month into the employment relationship, that agreement was renegotiated so that the employee would receive the agreed annualised salary for the first 40 hours per week and then a flat hourly rate of $30.00 for all hours worked beyond that. Neither of these agreements were recorded in writing.

The relevant Award provided for overtime loading. The employee used that provision to argue that the agreed overtime rate of $30.00 should have been subject to those loadings and claimed  that he had been underpaid by approximately $20,000.00. If you multiply that claim across a workforce of approximately 120 employees, our client was facing the potential of a fairly significant problem.

Our client was ultimately able to successfully defend that claim through leading evidence that both corroborated the terms of the two agreements that had been reached and illustrated that the employee was better off under the terms of those agreements that would have otherwise been the case had the employee been paid at the rates provided for under the Award.

However, had our client properly recorded the terms of employment in a written employment agreement, a lot less time and money would have been spent in proving what those agreed terms were. Indeed, litigation probably would have been avoided all together.

Properly recording the terms of employment may seem like a significant administrative burden but with a comprehensive master agreement it does not have to be. A relatively small financial and time investment at the outset of the relationship can save a business from a significant financial and time investment down the track.

We specialise in providing clarity and confidence to business operators in their legal relationships with their personnel. If you are concerned that your business may not have properly recorded the terms upon which it has engaged its staff, contact us before it becomes a real problem.