Payment in kind and unpaid work trials

An employee must be paid in full for all hours worked and in money by either cash, cheque, money order, postal order or similar, or by crediting the funds to the employee’s bank account or any other method authorised under a modern award.

Some employers may wonder whether they can offer alternatives as compensation, such as a free meal or coffee. This is referred to as “payment in kind”.

Employers are unable to pay their workers in any other method other than what is prescribed under the Fair Work Act (the Act). Doing so is unlawful and is a contravention of the Act. A corporation found to have made a serious contravention could face a fine of $666,000 and an individual could be fined $133,200.

In addition, employers should ensure that they pay their workers their correct entitlements as set out under the relevant modern award.

An employer may decide to give staff benefits such as discounted meals and coffees but cannot offer such goods as payment for work. An employer is also unable to offer “freebies” such as drinks or meals in exchange for other award entitlements such as breaks.

Unpaid work trials

It is not uncommon for an employer to offer a potential new employee a “trial” to see if they have the right skills for the job. The unpaid trial should not be for long periods of time. In most circumstances and depending on the nature of the role, the trial should not be for longer than 1 or 2 hours. It is important that the trial is treated as such; an opportunity for the person to demonstrate that they can adequately perform the duties of the role. Any task required that is beyond a demonstration, would be deemed as work and should be paid.

Before the person starts the trial, the employer should be very clear that it will be unpaid to avoid any confusion.

Example: Demonstrating skills in an unpaid trial

Christian has been asked to do an unpaid trial serving customers at a retail store.

The trial lasts for 5 hours and in addition to serving customers, Christian is also asked to unpack stock, put stock on display on shelves, throw away rubbish and sweep the floors.

These activities go beyond demonstrating the skills required for the job. Christian should be paid for the time that he worked.