A Case Study of Underpayment of Salaried Employees
The Coles and Woolworths case highlights the potential impact of failing to pay your salaried staff correctly.
- The Issue: Salaried store managers and department managers were paid annual salaries, but these did not cover the actual overtime and penalty rates owed under the General Retail Industry Award 2010.
- “Set-off” Ruling: The Federal Court ruled in September 2025 that supermarkets cannot use “set-off” clauses (averaging high pay over a year to cover overtime) to negate entitlements in individual pay periods.
- Case Status (March 2026): Justice Nye Perram expressed frustration over 2,500 pages of submissions, with the litigation expected to continue, potentially lasting several more years.
Repayments and Liability of Underpaying Salaried Employees
- Woolworths: Had already repaid over $300 million to employees by October 2025.
- Coles: Had made remediation payments of over $7 million by October 2025, but faces a significantly higher total liability from the ongoing court action.
- Total Cost: The total bill is expected to exceed $1 billion when combining ongoing class action penalties, interest, and unpaid entitlements.
The Requirement of Underpaying Salaried Employees
Salaried employees earning less than are required to be tested to ensure their pay passes the Better Off Overall Boot (BOOT)
https://www.fwc.gov.au/better-off-overall-test
As of May 2026, the key threshold for salaried employees is the High Income Threshold, which from 1 July 2025 to 30 June 2026 is $183,100 per annum.
As of January 1, 2025, in Australia, intentional wage theft is a criminal offence under the Fair Work Act 2009. Penalties include up to 10 years in prison for individuals and fines up to $8.25 million for corporations, or three times the underpaid amount. This applies to deliberate underpayments of wages, superannuation, and entitlements.
Key Penalties for Criminal Wage Theft (From 1 January 2025)
- Individuals (Managers/Directors): Up to 10 years imprisonment and/or fines up to \(\$1,650,000\) (5,000 penalty units) or 3 times the underpayment.
- Companies (Body Corporate): Fines up to $8,250,000\) (25,000 penalty units) or 3 times the underpayment, whichever is greater.
Criminalising wage theft law
The offence will apply to employers who intentionally engage in conduct that results in the underpayment of their employees. It will apply to employee entitlements under the Act or a fair work instrument (such as a modern award or enterprise agreement), but not to solely contractual entitlements.
The offence will cover intentional underpayments of superannuation contributions where they are required by the Act, a fair work instrument or a transitional instrument, to the extent of the Commonwealth’s legislative power. All employers will still be required to comply with their superannuation obligations under taxation law and industrial instruments.
The wage theft offence will carry a maximum of 10 years’ imprisonment, and/or a maximum fine of the greater of: · 3 times the amount of the underpayment, if the court can determine that amount, or · for an individual: 5,000 penalty units ($1,565,000); or for a body corporate: 25,000 penalty units ($7,825,000).
The Opportunity to Test Your Business’ Salary Compliance
Put your mind at rest about the possibility that you may be underpaying your senior and mid-level salaried employees by using the best available Inzenius Award tester on the Inzenius website, with FWO award conditions and rates, and the Salary Tester. We have included the highest-rate grade levels for each award so you can test your non-award or annualised-salary staff against them.
We have the most common awards used by our clients. If you need an award that is not available in our published list, let us know at bootest@inzenius.com
Using The Inzenius Award Tester
Log onto the Inzenius website to take your own confidential test of your salaried employees’ pay at www.inzenius.com
It is as simple as selecting your award and adding the employee timesheet for the test week(s)
Cost and save the report as a PDF or Excel file to compare with the pay they received. You can recalculate multiple weeks or fortnights for right periods to sum the amount for the month if required.
The results will not be saved by Inzenius to maintain your confidentiality
Instructions on Using the Inzenius Award Tester
