A Calombaris cautionary tail

With the recent media furore over the long-running saga of George Calombaris’ alleged underpayment of staff to the effect of nearly 8 million dollars, there has never been a more pertinent moment to take a fine toothcomb to your own back-end processes.

If you’ve managed to miss all the drama, the business-owner and MasterChef judge has spent the last four years embroiled in a financial scandal where it is alleged his company, MAdE Establishment Group, had through an issue with their payroll system, been underpaying some members of their staff for the past eight years.

In his defence, it would appear that MAdE Establishment Group made some effort to rectify the problem when it was brought to their attention in 2015. They launched an independent investigation and voluntarily paid out a 2.6 million dollar discrepancy. Unfortunately, the latest advance in the case has indicated that the amount owed was closer to 7.83 million.

And there are many other hospitality industry cases that have been or are before FairWork or being brought to their attention at the moment. But it’s not just top chefs that are falling foul of the law. Sydney businessman, Kit Antony Lam, is also currently under-fire from the FairWork Ombudsman after it was discovered that his live-in nanny was allegedly underpaid to the tune of $155,178 for her year of service. When the FWO looked into her total earnings – it worked out she’d been paid less than $2.50 an hour with no allowances for overtime or overnights, both of which are required by the award. The nanny was allegedly brought over from the Philippines by Lam and had little understanding of her rights under Australian law, making her especially vulnerable to financial exploitation.

So, what can you learn from this?

Whilst one can never know for sure what was and was not intentional in these cases, they contain potential business-saving lessons. Ignorance of the appropriate legislation, awards, taxation, super or changes/updates to them is not bliss and won’t protect you from the pain of fines and back-dated repayments.

Regardless of intention, if you’re not keeping on-top of your worker entitlements, you, as the business owner, are (as far as the legislation is concerned) complicit in any issues or underpayments that may arise (and now personally liable for repayment of that debt).

Calombaris, the man may not have wanted to short-change his staff but Calombaris the business owner needed to have known better.  

Even if your employees aren’t complaining, what they don’t notice today, somebody is likely to eventually point out the error to them – and they’ve six years to make a back-dated claim through fair work.

Even if your underpayment isn’t in the realms of millions of dollars for hundreds of staff like Calombaris, the time, effort, angst and energy it will take to go back through your payroll with a fine toothcomb once under the scrutiny of FWA or the ATO will take its toll – on you, your business and your team.

What can you do to avoid it happening to you?

If you’ve got staff, there are a couple of things you can do.

  1. Make sure that you’re compliant with the ATO’s STP (single touch payroll) requirements. It’s designed to help make sure that you don’t ‘suddenly’ incur eight years of underpayments.
  2. Check the awards, enterprise agreements, or other pay contracts you’re currently working with and make sure they comply with the current legislation. Seek external professional HR/legal advice if you need to. Even Calombaris with his significant back office team found the awards hard to navigate. Don’t assume you’ve got it right.
  3. Make sure you pay super on time. If you’re late, you lose the right to claim it as a tax deduction.
  4. Plan for upcoming changes to super guarantees, updates to minimum wages, etc so that it doesn’t hit you all at once. You’ve got just shy of two years to get ahead of the next change when the super guarantee increases to 10% on July 1, 2021.

If you’re suddenly finding yourself in a panic, take a breath. Everything is fixable and particularly so if you take a proactive approach to get ahead of the problem, ideally before you get audited.  

Your accountant can take a look at your payroll with you and guide you through any course-correction and payments you need to monitor. Whilst your intentions aren’t worth a whole lot legally, they do carry weight personally and making an effort to rectify any potential issue goes a long way to keeping an oversight from becoming a scandal.

If you’d like help making sure your payroll processes are up to date, we’d love to help. You can call us on 02 6023 1700 or drop us a note via the form below.

Got a question? Get in touch

If you've got financial or business questions, or you just want to run something by us, we'd be delighted to really talk to you – in person, over the phone - call us on 02 6023 1700 - or you can use the form below and we'll get back to you.

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About us:

Lloyd Accounting is a boutique accounting firm based in North Albury that operates with the sole purpose of making your tax and business affairs as easy as possible. For us, it's about really understanding what it is you're wanting to achieve and then using our experience and expertise to help facilitate that.

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Lloyd Accounting is now located at 932 Waugh Rd, North Albury, NSW.

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