Why does the Woolworths & Coles case matter? Let us explain.
- Feb 9
- 3 min read
Author: Laura Regan, Senior HR Consultant
You may have heard the chatter around the recent Woolworths and Coles case. This case is a game changer if you ‘pay above the award’ and utilise ‘offset arrangements’ for your award-based employees.
Ultimately, there are some key learnings which should be considered to minimise the risk of an underpayment claim being on your hands.
In a snapshot- what happened?
In a claim brought forward by the Fair Work Ombudsman, both Woolworths and Coles were pursued for underpayments of their salaried managers.
Both retailers paid annual salaries to their managerial staff, which was intended to cover all award entitlements (overtime, penalties, allowances).
Many employers utilise ‘offset’ clauses in their employment contracts with both salaried and non-salaried staff, particularly those who as a matter of practice pay above the minimum obligations under the Award. These clauses typically specify that such over award payments are intended to satisfy the minimum entitlements in awards or enterprise agreements.
While the salaries in this case were above the award minimum rates, it was found they did not consistently fully compensate their managers for what they were entitled to under the award for penalties and actual hours of work. The case resulted in court-enforceable outcomes involving very significant repayments, hundreds of millions collectively.
Why does this matter?
The commentary of the judge before this matter is important, as the findings are now law. This case has far-reaching implications for all employers relying upon above award payments for their award-based employees.
Paying above the award is not a ‘set and forget’ exercise, an ‘offset’ clause is not the ultimate protection.
The judge questioned the allowable nature of the retailers’ offset clauses, with an extensive period (26 weeks) which was attempted to be offset, ultimately finding that an offset should dealt with in each pay period.
While offset clauses can still be used, the ruling quashes, unless an award allows for it, the typical practice that the offset could be done over say a 6- or 12-month period as the employee would be ‘better off’ in the long run. No longer can you utilise ‘over award’ payments from previous pay periods to offset an obligation in another pay period.
Wages should be reviewed to ensure they are meeting the award requirements within each pay cycle, with ‘top up’ payments.
Simply put, if you pay your staff fortnightly, you should be checking against time records each fortnight to determine whether the wages for that fortnight require a ‘top up’ (e.g.- if a team member works excessive overtime in that fortnight, they may be entitled to additional wages when weighed up against the award minimum rates and overtime conditions).
Records of hours worked are important for award-based employees, even where an annual salary is paid.
Records of hours of work (e.g.- timesheets) are still required for award based annual salary employees. Such records will ensure that employers track entitlements, to assist with the meeting of their wage obligations against an employee’s actual hours of work.
This ruling also determined that these records are needed to meet record keeping obligations under the Fair Work Act. To comply, employers need to ensure records are accessible, include details of higher rates of pay and detail overtime hours worked, with such records kept for seven years.
What now?
This ruling is complicated. Long standing practices have been thrown up in the air, and the reality is that many of the HRIS and payroll systems are unable to keep up from a record keeping and compliance perspective.
The HR Cartel team are here to help! We can:
Audit your payroll and record keeping systems;
Review and re-draft your contract clauses to ensure compliance; and
Talk strategies to keep on top of your record keeping obligations.
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