The Financial Risks of Underpaying an Apprentice

Key Takeaways

• Underpaying an apprentice is often a mistake, but the employer is still responsible for putting it right.
• The common causes are the wrong award, missed training time, unpaid extra hours and poor records.
• Build a simple pay check routine so errors are caught early, not years later.
• Always take pay rates from the official source, because they change.
• If you do not want to manage payroll and training administration yourself, a group training organisation can do it.

Introduction

Underpaying an apprentice rarely starts as a decision. It starts with a rate that was copied from an old contract, a training day that was not counted, or an award that does not quite fit the job. Months later, the gap has grown into a debt and a legal problem.

This post looks at the financial risks of underpaying an apprentice and the habits that prevent it. It is a general guide, not legal advice. For the full picture of what an apprentice costs, read what is the cost of hiring an apprentice.

How Underpayment Happens

Most cases are small errors that repeat every pay cycle.

• Using a rate from a previous apprentice without checking whether the year level or age has changed.
• Applying the wrong award or agreement for the trade.
• Paying a flat weekly amount that falls below what the person would receive once overtime, penalty rates and allowances are counted.
• Not paying for time spent at training or at the training institute.
• Asking an apprentice to start early, stay late or finish tasks unpaid.
• Missing superannuation payments or allowances for tools, travel or uniforms.

Each of these can be avoided with a checklist and a regular review.

Why the Cost Is Larger Than the Missing Wages

Back pay is only the first part. If a pay error is found, you may also face other costs. Penalties and outcomes depend on the facts, so get advice if it happens to you.

• Back pay for the full period the error ran.
• Possible fines or enforcement action by the regulator.
• Time spent on audits, legal advice and staff meetings.
• Damage to your reputation with staff, customers and future apprentices.
• Loss of trust from the apprentice, who may leave.

It is almost always cheaper to pay the right rate from the first day.

Get the Rate From the Right Source

Do not guess and do not copy what a nearby business pays. Pay rates depend on the award or agreement, the trade, the stage of the apprenticeship and other factors.

• Check the Fair Work apprentice and trainee pay page for current information.
• Read the actual award or agreement that covers the role, including allowances and overtime rules.
• Confirm the apprentice's year level or stage each time it changes.
• Review rates whenever official pay settings change, which they do from time to time.

If you are unsure, ask the Fair Work Ombudsman or a qualified adviser before you pay, not after.

Keep Records You Can Show

Good records are your best protection if a question is ever raised.

• Record start and finish times, breaks and training days.
• Keep payslips, contracts and training agreements together.
• Note any allowances paid and the reason.
• Check with Fair Work how long records need to be kept, as the requirement is set by law.

Records are only useful if they are accurate. Review them against payslips every pay cycle in the first few months.

Build a Simple Pay Check Routine

A routine does not need to be complicated. It needs to be regular.

At the start

• Confirm the award or agreement and the correct classification.
• Set up payroll with the right rate, super and allowances.
• Add the training days and study release to the roster.

Every pay cycle

• Compare hours worked with hours paid.
• Check overtime and penalty rates have been applied.
• Confirm training time has been paid.

Every few months

• Check whether the apprentice's rate should have changed.
• Ask the apprentice if they have any questions about their pay.
• Have somebody who did not prepare the payroll look it over.

What to Do If You Find a Mistake

Act quickly and keep a record of what you do.

• Work out the period and amount involved.
• Contact the apprentice, explain the error and tell them how it will be corrected.
• Fix the payroll setup so it does not repeat.
• Get advice from Fair Work or a professional if the amount is large or you are unsure of your obligations.

Honesty and speed usually put you in a better position than waiting to be asked.

Related Resources

• Understanding the Cost of Hiring an Apprentice
• Recruiting Council Apprentices Compliance Standards
• Managing the True Cost of Hiring an Apprentice Safely
• Apprentice Contract Requirements for Small Business
• Hire an apprentice with Future1st
• Fair Work: apprentice and trainee pay rates

Frequently Asked Questions

What if I underpay an apprentice by mistake?

You are still responsible for the shortfall. Fix it quickly, tell the apprentice and get advice if you are unsure of your obligations.

Do I pay an apprentice for training time?

Time at training is generally part of the apprenticeship and treated as paid time, but check the award or agreement that applies to your role.

Can I pay a flat weekly salary?

Only if it covers everything the person would receive under the award or agreement, including overtime and penalties. Keep records of hours to show that it does.

How often do pay rates change?

They can change from time to time. Check the official Fair Work page regularly rather than relying on last year's figure.

Who handles payroll if I use Future1st?

Future1st employs the apprentice and handles payroll and training administration. You provide the day-to-day work and supervision.

Take Payroll Off Your To-Do List

If you would rather not manage apprentice pay and paperwork on your own, Future1st can employ the apprentice and handle payroll and training administration for you. See how it works on our hire an apprentice page or call (03) 9656 9797.