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Unintentional underpayments – update April 2020

The back payment process for former and current employees has commenced.

Key facts

  • As a result of an enquiry from the Australian Services Union (ASU), Western Power initiated a review of how Western Power applies the ‘better off overall’ test to Individual Agreement (IAs) and Flexibility Agreements (FAs) against the ASU Enterprise Agreement (ASU EA).

  • Our review determined that Western Power had made an error in the way the ‘better off overall’ test was applied to IAs and FAs. Specifically, Western Power did not consider progression through the ASU EA pay point levels or take into account other entitlements such as overtime, penalties and allowances. In addition, a non-compliance was identified in relation to Western Power varying the effect of the superannuation clause in the ASU EA in the way it implemented total fixed remuneration arrangements for employees on IAs and FAs.

  • Our error has resulted in unintentional underpayments to some current and former IA and FA employees.

  • The error only affects some current and former employees who have been employed on IAs or FAs. It does not affect employees who have only ever been employed under the conditions of the ASU EA, nor any employees engaged under the Western Power and CEPU Enterprise.

  • Only those individuals employed at Western Power on an IA or FA in the period since 25 March 2010 may be affected.

  • Western Power self-reported the issue to the Fair Work Ombudsman (FWO) in August 2019 and has kept the FWO and the Australian Services Union (ASU) informed since then as to how we are rectifying unintentional underpayments for current and former employees.

  • We apologise to all our current and former employees for this error. We are working hard to ensure that current and past employees are paid their entitlements.

  • We are in the process of commencing back payments to relevant current employees identified as being underpaid as a result of our review to date. We are in the process of confirming contact and other relevant details for impacted former employees, so that we can commence back payments to them once our review is complete. Our goal is to complete back payments to all impacted current and former employees by 30 September 2020.

  • If you are a former employee who receives a letter about back payments, please follow all the instructions so we can obtain your details to allow us to progress payments to you.

In 2019 an error was identified in the way the ‘better off overall’ test was applied to the pay point progression (PPP) provision in the ASU EA.

Further review of the application of the ‘better off overall’ test in respect to the entitlements employees on IAs and FAs received as compared to all entitlements provided under the ASU EA identified that additional adjustments were required.

These adjustments relate to Western Power not accounting for some of the terms in the ASU EA when conducting the ‘better off overall’ test of the IAs and FAs, including overtime, penalties and allowances that employees would have been entitled to under the ASU EA.

In addition, a non-compliance was identified in relation to Western Power varying the effect of the superannuation clause in the ASU EA in the way it implemented total fixed remuneration arrangements for employees on IAs and FAs.

The error only affects some current and former employees who have been employed on an IA or FA since 25 March 2010. These individuals may be eligible for back payment depending on their individual circumstances.

It does not affect employees who have only ever been employed directly under the ASU EA, nor does it affect any employees engaged under the Western Power and CEPU Enterprise Agreement.

Immediately upon identifying and self-reporting the unintentional underpayment issue in August 2019, Western Power commenced a review to identify current and former employees impacted and the underpayments owed.

This review is complex and involves calculating what IA and FA employees would have been paid if they had been employed directly under the terms of the ASU EA during the review period compared to what they were paid under their IA or FA.  If an employee would have earned more on the ASU EA, then the difference will be the underpayment.

The calculation takes into account all entitlements under the ASU EA in order to ensure the IA and FA employees were ‘better off overall,’ as well as addressing the superannuation entitlements under the ASU EA within the IA and FA employees’ total fixed remuneration (TFR).

Our review to date (up to 24 April 2020) has allowed us to quantify underpayments to employees on IAs and FAs in relation to the initial components of PPP and varied superannuation contributions.

Back payments in relation to these initial components are scheduled to be made to affected impacted current Western Power employees at the end of April as part of the normal pay run.

Former employees identified with underpayments related to PPP or varied superannuation are being sent letters at the end of April notifying them of the errors. These letters contain instructions to enable us to collect required information to validate the impacted individuals’ identity and set them up in our systems to receive back payment, once the review is completed.

We continue to complete our review of all varied entitlements in the application of the ‘better off overall’ test including overtime and allowances. Our goal is to complete our review and make identified back payments to all impacted current and former employees by 30 September 2020.

Yes. If you are a former employee of Western Power who worked on an IA or FA in the period since 25 March 2010 and have been identified as having an underpayment as a result of our review completed to date, you will be receiving a letter from us seeking to confirm a range of details. You should receive your letter in late April. Please follow the instructions on the letter and the other enclosed documents so that we can verify your information to enable us to make the back payment to you.

Western Power has engaged a trusted third-party provider Cited: Proof at Work (Cited) to conduct identification checks and to ensure our information is correct. Cited is a well established and respected service provider used to dealing with such sensitive information – visit cited.com.au to learn more about the business.

We won’t be able to make a back payment to a former employee unless we can confirm your identity and obtain all your details. We encourage you to take the time to complete the process to confirm your details by 1 June 2020 to enable us to make the necessary back payment to you once the amount has been finalised.

If you haven’t received a letter it may be because you have not been identified as being owed a back payment as a result of our review completed to date. Alternatively it may mean we don’t have your correct contact details. If this is the case and you have been employed on an IA or FA with Western Power at some point after 25 March 2010, contact us at remuneration.enquiry@westernpower.com.au to advise us of your current contact details.

Our goal is to complete back payments to all impacted current and former employees by 30 September 2020.

Whereas impacted current employees may receive their back payments in either one or two payments, we anticipate impacted former employees will receive all back payment in a single payment by 30 September 2020.

Every employee will have differing circumstances such as their TFR, length of employment on IA or FA etc.  This means that back payments will differ for each individual. If impacted, you’ll be advised by letter about your personal back payment amount when our review is finalised. You will also receive a personal statement setting out the amounts, which you should retain to help you with your future tax returns.

Interest will also be paid on any underpayments identified.

Individuals employed under the conditions of the ASU EA can move up through either one or two pay points, subject to time in role and an annual review each year confirming that alignment exists between the employee’s performance and the expectations at the next pay point (see clause 12(b) of the ASU EA). The next pay point attracts a higher salary (noting that most classifications only have two pay points ‐ step 1 and step 2).

Previously, when undertaking the ‘better of overall’ test for IA or FA employees, Western Power's interpretation was that these employees were not eligible for PPP, and hence the salary used for for the ‘better off overall’ comparison was the pay point the employee was on when they first entered into their IA or FA, which in many cases was the first pay point (step 1).

From a back payment perspective, we’re assessing each individual’s circumstances considering the ASU EA equivalent pay point for the role they were performing during every pay period over the review period (25 March 2010 to 31 August 2019), the length of time within the role, and any personal classification related to a redeployment that may have occurred. If in any period an individual’s ASU EA equivalent rate of pay was in excess of their TFR rate of pay on their FA or IA, a back payment will be calculated and paid. However, in many cases, individuals’ TFR paid exceeded the ASU EA equivalent at the progressed paypoint, and no back payment is required.

From 1 July 2015, the superannuation contribution rates per the ASU EA began to increase from the 9.5% superannuation guarantee rate as set out below:

Financial year 30-Jun-2016 30-Jun-2017 30-Jun-2018 30-Jun-2019 30-Jun-2020*
Employer superannuation contributions to IAs and FAs** 9.5% 9.5% 9.5% 9.5% 9.5%
Employer superannuation contributions per ASU EA 10% 10.50% 11% 11% 11%
Variance 0.5% 1.0% 1.5% 1.5% 1.5%

Up until 19 January 2020, employees on an IA or FA received an employer superannuation contribution in line with the statutory superannuation guarantee rate of 9.5% with the additional 0.5% - 1.5% paid as cash as part of their TFR.

Western Power believed that the employer superannuation contribution under the ASU EA could be varied in this manner and considered as part of the ‘better off overall’ test. However, Western Power now understands that this is not something that could be varied under its IAs or FAs, and the extra 1.5% superannuation contribution should have been paid into employees’ nominated superannuation funds.

A back payment of the superannuation contribution rate difference between the ASU EA and IA/FA rates has been calculated for all IA and FA employees from 1 July 2015, when the variation between superannuation contributions between employees on IAs and FAs and those on the ASU EA commenced.  Both the back payments and associated interest will be paid to impacted current and former employees’ nominated funds.

This issue of the varied superannuation provisions does not impact employees who are or were members of the Government Employees Superannuation Board (GESB) Gold State Fund during the review period, as their superannuation entitlements are set out in the Government Employees Superannuation Regulations (WA).

The calculation of any back pay entitlements will consider all monetary items that an IA or FA employee would have been entitled to had they been directly employed on the ASU EA, including overtime and allowances. This is a complex matter and we are still finalising our review.  However, our goal is to finalise back payments to current and former employees by the end of September 2020.

Under the Fair Work Act 2009, (Act) the longest period in which back payments under enterprise agreements, IAs and FAs can be sought is six years from when the entitlement arose.

Western Power intends to make the back payments for the full six-year period – that is, from 25 August 2013 being six years prior to the time Western Power became aware of the unintentional underpayments and notified the Fair Work Ombudsman (FWO) of them.

However, as a gesture of good faith, Western Power is going beyond this period in relation to the PPP errors and has extended the review, calculation and payment period back to 25 March 2010 when the 2009 ASU EA first commenced as it has reliable data to do so.

The back payment in respect to superannuation contributions that were varied from the ASU EA covers the period back to 1 July 2015 when superannuation payments on the ASU EA began to vary from the statutory superannuation guarantee rate of 9.5%. Prior to then there was no variation of the superannuation payments for IA and FA employees.

Every former employee’s circumstances will be different; for example, how much your back payment is, whether you’ve continued working after leaving Western Power, or not worked since. You will receive a personal statement that will be required for, and assist you with, your tax return.

Our goal is for former employees to receive their back payment by 30 September 2020, and this will need to be accounted for in the following year’s tax return (i.e. financial year ending 30 June 2021).

If you’re acting on behalf of a deceased estate of a former employee (as Executor of the Estate), please email remuneration.equiry@westernpower.com.au with your details and who you are acting as Executor for. Our team will liaise with you directly to confirm your identity. Please note you’ll be required to submit additional information including a copy of the death certificate and a statutory declaration regarding your status as Executor of the Estate.

If you’ve received the letter and you’re not the executor of the former employee’s estate, please email us at remuneration.equiry@westernpower.com.au with the contact details for the Executor.  We’ll provide the Executor of the Estate with instructions on what he or she needs to do to complete the identification check when we have received his or her contact details.                       

Current and former employees can contact us via remuneration.enquiry@westernpower.com.au.

If former employees of Western Power have any concerns about the authenticity of the letter they’ve received about back payments, they can also contact our Customer Service Centre on 13 10 87.