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Unintentional underpayments – update September 2020

Western Power is finalising final back payments to current and former employees who were unintentionally underpaid during their employment.

Key facts

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

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

  • The error resulted in unintentional underpayments to some current and former IFA employees. Only some individuals employed in the period since 25 March 2010 may be affected.

  • It doesn't 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 Agreement.

  • Western Power self-reported the issue to the Fair Work Ombudsman (FWO) in August 2019 and has kept the FWO and the ASU informed as to how we are rectifying the issue.

  • We apologise to all our current and former employees for this error.

  • Since April 2020 we've been endeavouring to contact all former employees who were on IFAs and have been identified as having underpayments.

  • All impacted former employees will receive their back payments by 1 October 2020 if they've provided us with up-to-date identification and bank details.

  • If you are a former employee who received a letter from us requesting that you confirm your details through Cited, but you have not yet done so, please follow all the instructions so we can obtain the details needed to progress payments to you.

  • If you have a question specific to your circumstances that is not covered by the FAQs below, please email us or call our dedicated hotline on 1800 450 066.

  • As part of resolving this issue, we’ve entered into an Enforceable Undertaking with the Fair Work Ombudsman (FWO) to ensure our ongoing compliance with Commonwealth workplace laws.

  • As part of the Enforceable Undertaking, a dedicated telephone number (1800 450 066) and email address has been set up for current and former employees to make further enquiries. Alternatively, anyone can contact the FWO via fairwork.gov.au or on 13 13 94; or an Industrial Organiser from the Australian Services Union on 0417 969 767 or 0412 152 983. 

  • The FWO has published a media statement regarding the undertaking.

FAQS

The following FAQs were updated as of 17 August 2020 to provide additional information about back payments to former Western Power employees.

There is a separate FAQ document with general tax and superannuation information related to back payments.

You can read the current Western Power and ASU Enterprise Agreement on the Fair Work’s website. Alternatively, you can also find the 2013 ASU EA or the 2009 ASU EA on the site.

As a result of a review of the application of the ‘better off overall’ test, Western Power determined and self-reported to the Fair Work Ombudsman (FWO) that it did not adequately compensate some employees on IFAs due to two errors.

The first error involved a misapplication of the ‘better off overall’ test performed annually for IFA employees by failing to correctly take into account varied entitlements related to pay point progression (PPP), allowances, penalties and overtime.  This resulted in some IFA employees not receiving terms and conditions of employment that were ‘better off overall’ than those provided by the ASU EA.

The second error involved Western Power varying terms from the ASU EA that could not legitimately be varied by the IFAs including:

  • Payment of superannuation contributions above the statutory superannuation guarantee percentage (%) directly to IFA employees as part of their the total fixed remuneration rather than into their super accounts; and

  • Capping of redundancy payments in IFAs.

The errors only affect some current and former Western Power employees who have been employed on IFAs underpinned by the ASU EA at some point since 25 August 2013. These individuals may be eligible for back payment depending on their individual circumstances.

It does not impact 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 after self-reporting the unintentional underpayment issue to the FWO in August 2019, Western Power began a review to identify the current and former employees impacted, and calculate the back payments owed to them. Western Power engaged the assistance of independent expert consultants to assist with this process.

Our review has involved calculating what IFA employees would have been paid had they been employed directly under the ASU EA during the review period (using the best data available to us) compared to what they were paid under their IFA.

If an employee would have earned more on the ASU EA for any individual remuneration year during the review period, then the difference has been identified as a back payment owed to that employee or former employee.

We’ve completed our review related to pay point progression, the varied superannuation contributions that were previously paid into the total fixed remuneration of IFAs rather than super accounts, and all varied terms. Models were created to calculate varied terms, by comparing what the entitlements would have been for overtime, penalty rates (shift premiums) and allowances (availability, higher duties and living away from home), if impacted individuals were employed directly on the ASU EA.

The amounts that have been calculated for the varied terms have then been considered in a ‘better off overall’ test for every IFA employee. This test has been carried out for each remuneration year in the review period.

If a deficit was found in what an employee on an IFA was paid in any remuneration year in the review period, it’s been identified as an additional back payment owed to them. These back payment amounts will be paid to current employees in August 2020 and to located former employees by 1 October 2020.

Under the Fair Work Act 2009, the longest period in which back payments under enterprise agreements or IFAs can be sought is the six years prior to when the claim for the back payments are made.

Western Power’s review period for any back payments for impacted IFA employees is the full six-year period from 25 August 2013. That date is six years prior to when we identified and then self-reported the unintentional underpayments to the FWO.

As a gesture of good faith, we’ve extended this period when rectifying underpayments related to pay point progression (PPP) back to 25 March 2010. This earlier date is when the 2009 ASU EA first commenced and we have reliable data to calculate PPP.

Individuals employed under the ASU EA can move up through either one or two pay points, subject to the time in their role and an annual review that shows alignment 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 one and step two).

Previously, when undertaking the ‘better of overall’ test for IFA employees, Western Power's interpretation was that these employees were not eligible to progress to the next pay point after entering into an IFA, and hence the salary used for the annual ‘better off overall’ comparison was the pay point the employee was on when they first entered into their IFA, which in many cases was the first pay point (step one).

From a back payment perspective, the circumstances of each individual on an IFA has been assessed considering the ASU EA equivalent pay point for the role they were performing during every remuneration period over the review period (25 March 2010 to 31 August 2019), plus the length of time in the role and any personal classification related to a redeployment that may have occurred.

If, during any remuneration year in the review period, an individual’s ASU EA equivalent rate of pay was in excess of their total fixed remuneration (TFR) rate of pay on their IFA, a back payment has been calculated and will be paid. However, in many cases, the individual’s TFR that was paid has exceeded the ASU EA equivalent at the progressed pay point, 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% statutory 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 IFAs 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 IFA received an employer superannuation contribution in line with the statutory superannuation guarantee rate of 9.5% with the additional 0.5% to 1.5% (depending on which financial year) paid as cash directly to the employee as part of their TFR.

Western Power believed that the employer superannuation contribution under the ASU EA could be varied in this manner and was considered as part of the ‘better off overall’ test. However, we now understand that this is not something that could be varied, and the extra 1.5% superannuation contribution was required to be paid into each employee’s nominated superannuation fund.

A back payment of the superannuation contribution rate difference between the ASU EA and IFA rates has been calculated for all IFA employees from 1 July 2015, when the variation between superannuation contributions between employees on IFAs and those on the ASU EA commenced and only the 9.5% contribution was paid into the IFA employees' superannuation funds.  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 ‘better off overall’ test is an annual reconciliation which compares what was paid to an individual on an IFA with what would have been payable to them if that individual had been employed solely under the ASU EA.

Any deficit to what was paid during each remuneration year during the review period has been identified as an underpayment to be paid to the individual. If a surplus remains after considering all of the varied ASU EA terms, then no underpayment has occurred to the individual and no back payment is required for that year.

Example 1 – In this example an IFA employee has an underpayment of $3,489 for remuneration year ending 31 August 2019 as a result of applying the ‘better off overall’ test.  This is because after calculating what the individual would have been paid if employed directly on the ASU EA, including all the varied terms such as overtime, higher duties and availability allowances, there was a deficit to what they were paid on their IFA for that remuneration year.

Remuneration year ending 31 August 2019
EA base salary (6.2 professional) $98,789
IFA base salary $105,000
Base salary surplus $6,211

 

Varied EA entitlement Calculated unpaid EA entitlement Running total base salary surplus/(deficit)
Overtime $5,000 $6,211 - $5,000 = $1,211
Higher duties (allowance) $1,200 $1,211 - $1,200 = $11
Availability (allowance) $3,500 $11 - $3,500 = ($3,489)

Example 2 – In this example the employee has no underpayment for remuneration year ending 31 August 2019 as a result of applying the ‘better off overall’ test.  This is because after calculating what the individual would have been paid if employed directly on the ASU EA, including all the varied terms such as overtime, higher duties and availability allowances, they were still paid a surplus on their IFA for that remuneration year.

Remuneration year ending 31 August 2019
EA base salary (6.2 professional) $98,789
IFA base salary $110,000
Base salary surplus $11,211
Varied EA entitlement Calculated unpaid EA entitlement Running total base salary surplus/(deficit)
Overtime $5,000 $11,211 - $5,000 = $6,211
Higher duties (allowance) $1,200 $6,211 - $1,200 = $5,011
Availability (allowance) $3,500 $5,011 - $3,500 = $1,511

As IFAs were paid fixed salaries inclusive of all entitlements, a complete set of time records was not available for all employees. Therefore, we’ve used the best information available to develop a methodology that quantifies overtime entitlements that seeks to provide the most holistically fair process for all impacted employees on IFAs.

The review identified that 40% of IFA employees recorded their time for job costing purposes via approved time sheets over the six-year review period. From a thorough analysis of those time records of IFAs, the highest annual average overtime as a percentage of normal time worked was calculated at 3%.

The 3% average was used to calculate overtime hours for IFA employees who didn’t time sheet.

Overtime for IFA employees who did time sheet was calculated at the higher of their charged time via timesheets, or the 3% average. This addresses those that may have just recorded their normal hours on their timesheet but had worked overtime.

Each employee’s ASU EA equivalent pay rate was applied to the overtime hours calculated at appropriate penalty rates per the ASU EA. The unpaid portion of the overtime calculated was considered in the annual ‘better off overall’ test (Refer to the above FAQ).

Other data sources such as swipe card data and network log on/offs were explored for their validity to calculate overtime. However, ultimately, they were determined to not be credible sources of information for the purposes of creating our methodology for assessing overtime worked.

Swipe card data was only available for 18 months of the six-year review period. On assessment of the available data, 51% was unusable as the first swipe record for an employee on any given day was an ‘exit’. In addition, this data source didn’t identify working from home or offsite work, and so had the potential to understate an employee’s working hours.

As employees are not required to log on and off their computer when their shift ends and have been found to use computers for personal use, network logons were not deemed a reliable data source.

The review also determined from consulting with the senior leadership team that many informal time-in-lieu arrangements were in place but not tracked, so reasonable overtime assumptions could not be made on that basis.

As such, it was considered that using the average overtime of all IFA employees who recorded time through approved time sheets over the six-year review period was the fairest estimate to apply to those who did not record the overtime they worked.

In line with clause 14 of the ASU EA, employees performing a role at a higher level for one (1) week or more are paid a premium of 7.5%. Higher duties are recorded in Ellipse, as this is how position access is granted to the employee performing the higher-level position.

This data source has been used to calculate the 7.5% allowance that each acting period attracts. This calculated higher duty amount has then been considered in applying the ‘better off overall’ test. Depending on an individual employee’s ‘surplus’, even if you were regularly performing higher duties there may not be an underpayment (refer example 2 above).

Yes it has. In line with clause 13.1 of the ASU EA, a daily availability allowance is to be paid when employees are required to be on-call and are placed on an availability roster. When receiving an availability allowance, an employee is available for call-back to Western Power and to be contactable at any time. This includes maintaining full compliance with company policies and procedures, such as fitness for work.

We have reviewed all on‑call roster records available. During the review period, some employees received an annual availability allowance attributed to a roster pattern. This pattern was identified via the Ellipse payroll code. Each roster or pattern was re-calculated using the daily ASU EA rates for consideration in applying the ‘better off overall’ test. Depending on an individual employee’s ‘surplus’, there may or may not be an underpayment.

In line with clause 7.2 of the ASU EA, shift work occurs where some or all of the employee’s ordinary hours are rostered outside of the spread of ordinary hours set out in clause 7.1, when the premiums set out in clause 8 apply.

To ensure shift employees on IFAs were ‘better off overall’, we calculated the actual penalties that should have been paid to each IFA shift employee using their shift roster and applying their ASU EA equivalent pay rates with the appropriate premiums as per clause 8. This was completed for each shift employee during the review period using their individual shift roster records from Ellipse. Any excess to what was paid as an allowance was considered in applying the ‘better off overall’ test.

In line with clause 13.4 of the ASU EA, living away from home allowances including travel, meals and incidentals are provided to cover out of pocket expenses associated with ‘living away’.

Where an employee has incurred an out-of-pocket expense, a business reimbursement form is submitted via our payroll processes. Prior to 1 January 2017, this form was submitted via a hard copy. After 1 January 2017, the form was submitted online via the HR Solutions Centre.

All hard copy and HR Solutions Centre business reimbursement claims have been reviewed for the six-year review period. At the time, employees were reimbursed for the actual amount claimed. In some instances, this amount was lower than the amounts outlined in ATO tables 1, 2 or 3 (EA entitlement). Where the amount reimbursed was lower, the deficit has been considered in applying the ‘better off overall’ test.  When an employee submitted a reimbursement claim that included an overnight stay, an incidental allowance was also considered in applying the ‘better off overall’ test.

Even after calculating all the entitlements each IFA employee would have been paid if employed directly on the ASU EA, a significant number of individuals were found to still be ‘better off overall’ based on what they were paid for each remuneration year.

Example 2 provided in the “What is the better off overall test?” FAQ above demonstrates a scenario where no back payment is owed after accounting for all varied terms such as overtime and allowances.

If you haven’t received a letter it may be because you’ve not been identified as being owed a back payment as a result of the review.

Alternatively, if you are a former employee, it may mean we have not received your correct contact details. If this is the case and you have been employed on an IFA with Western Power at some point after 25 March 2010, please email us.

If you have not received money in your bank account that matches your personal statement by the date specified, please advise us via email.

There is a separate FAQ on tax and superannuation, and you should also consult your own tax advisor if you need specific advice. Western Power will in certain circumstances provide some financial assistance to allow you to obtain any necessary advice. More information on this can be found in the tax specific FAQs.

Yes, it’s very important that you keep the personal statement as you or your tax advisor will need it to complete your next tax return.  More information on how to use the statement can be found in our separate FAQs on tax and superannuation document.

Where the back payment is considered ‘ordinary time earnings’ (earnings with respect to working ordinary hours) it is subject to superannuation at your current superannuation contribution rate. Western Power will be making the associated superannuation adjustment payments as a result of any underpayments into your nominated superannuation fund.

Interest will be paid to employees on any underpayments, as well as the superannuation back payment, calculated annually at the rate of 5.25%.  This rate is 4% above the cash rate published by the Reserve Bank of Australia at the end of the last financial year.

The portion of interest related to the varied superannuation contributions will be paid directly into employees’ nominated superannuation accounts.

We have remained in contact with the ASU throughout the review process. They’re aware of the methodology which has been applied to the retrospective review and that final payments are being made to both current and former employees. The ASU can be contacted via:

  • Senior Industrial Organiser: Paul Cecchini - 0412 152 983
  • Industrial Organiser: Yvonne Klaa - 0417 969 767

We appreciate this issue is complex and that we’ve provided you with a large volume of information in your individual statements and this FAQ document.

If you have a question specific to your circumstances that is not covered in these FAQs or the tax specific FAQs, please email us or call our dedicated hotline on 1800 450 066.

Independent financial advice 

We acknowledge that every individual’s circumstances are different and, as such, you may seek to obtain independent advice about the financial impact of your back payments.

To assist you to obtain any necessary advice, Western Power will reimburse costs of an appropriately qualified financial and or/tax advisor of up to a maximum of $300 (inclusive of GST).

Please complete the reimbursement request form below, including attaching your paid invoice documentation.

Reimbursement form

Former employee reimbursement of financial advice (up to a maximum of $300 incl GST)

Contact information

Details

Invoice upload

Note: expenses must be supported by tax invoices which itemise the expenses claimed. Credit card receipts are not acceptable. Please ensure your reimbursement claim is submitted by 31 October 2021.

Authorisation