Cleaners were dealt out of weekend penalty rates by their union amounting to $2 million a year in lost wages for a $25,000 payment from their employer to the union, a royal commission has heard.

The man at the centre of the deal is Victorian government whip Cesar Melhem, who denied any impropriety in the payment.

Mr Melhem said the payment was for workers’ union memberships, AAP reported.

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Workers for Cleanevent, a large cleaning company, were kept on wages that were negotiated under the workchoices scheme, sacrificing about $2 million a year in unpaid weekend penalty rates, the trade union royal commission heard.

John-Paul Blandthorn, a former organiser at the Australian Workers Union and now adviser to Premier Daniel Andrews, said former Victorian secretary Mr Melhem told him to do the deal.

“I said to Mr Melhem words to the effect that Cleanevent will be uncomfortable with his proposal, and Mr Melhem responded by saying that that was their bad luck and that Cleanevent needed to pay the AWU,” Mr Blandthorn’s statement to the royal commission said on Wednesday.

Mr Melhem allegedly said the money was for union memberships for Cleanevent’s workers.

Mr Blandthorn said he told Mr Melhem the arrangement had never been made before, and he wasn’t sure the company would agree to it.

“Mr Melhem then said to me that he was giving me a direction, and I had to work with Cleanevent to ensure they agreed to his proposal,” he said.

Counsel assisting the commission, Jeremy Stoljar, last week said the deal cost workers $2 million a year in unpaid penalty rates, while the company paid $25,000 a year to the AWU.

Mr Melhem appeared at the royal commission on Monday and denied saying the $25,000 was necessary to secure the extension of the enterprise bargaining agreement.

“As I recall, I spoke of the payment by Cleanevent to the AWU of $25,000 as a service fee,” he said in a statement.

Mr Andrews, who employs Mr Blandthorn in his office and gave Mr Melhem the position of government whip, has said the royal commission has a job to do and has refused to comment on the specifics of Mr Melhem’s case.

– with AAP