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Minimum wage madness

It is difficult to argue against the sense of a minimum wage system that protects the lowest paid in society against exploitation, but it is equally hard to justify government interference in setting wages for those that are far from downtrodden.

Australia is the only developed economy in the world that does not have a single national minimum wage. Instead, it has multiple minimum wages, or awards, depending not only on the industry that you work in, but the position that you hold with your employer, the time at which you complete your work and, if that was not complicated enough, until 2014, the state that you work in.

This leads to moments of government inspired madness. Bank managers, for example, have a minimum wage, with the government determining that they are not equipped enough to work out what they consider is fair and reasonable compensation for what they do. Perhaps more confusingly, a mechanic running a small business, is required to have the time and specialist knowledge to work out the hourly rate payable to a Level VI Vehicle Industry Tradesperson in New South Wales who works on a casual basis, has a National Diploma but only 1 year of relevant experience and sometimes works on a Sunday, when all of these factors are variables.

The problem is that these protections cause more issues than they solve, as confirmed by the work of the Fair Work Ombudsman. A national review of horticultural businesses, for example, found that almost 40% were breaching workplace law. Over 1/3 of employers failing to comply with their minimum obligations tends to indicate a problem with the law, rather than the employers.

Those that fail to comply with the raft of obligations are left subject to the cost and inconvenience of investigation and, in some cases, prosecution. Ignorance of requirements is no defence, leaving businesses exposed to fines and back pay, none of which is ever budgeted for.

How can businesses protect against this? They need to take specialist advice to ensure that they are paying their workforce in accordance with the relevant awards. They should also ensure that they have employment contracts and letters of offer that accurately set out the relationship between parties to avoid problems down the line. Simple steps, but they are often overlooked.