Wage theft is a serious issue that affects around 3 million workers in Australia, with employers underpaying wages by around $5 billion. In the last few years there have been several high-profile cases of wage theft and new laws have been implemented to help combat this issue. However, in the case of many small to medium businesses, it is often not interpreting the Award correctly
What is Wage Theft?
Wage theft occurs when employers underpay or fail to pay their employees for the work they have performed, it can take many forms – e.g. not paying the correct minimum wage, not paying overtime and withholding entitlements like personal leave or superannuation. The focus of this article will be on identified wage theft cases in Queensland, Victoria and New South Wales as well as the Woolworths case. We will also touch on the anti-wage theft legislation in these states.
What is Wage Theft?
Recent news headlines highlight the need for employers to review their internal HR and payroll practices to ensure compliance with workplace law . As an employer, you must ensure employees are paid the correct wages for all hours worked. The consequence of not paying correctly can be significant and include reputational, cultural, financial and legal ramifications; including hefty fines and even imprisonment.
To avoid underpayment risks and potential wage theft ramifications, you need to monitor four important areas:
- employment arrangements,
- remuneration systems,
- payroll and record-keeping, and
- workplace culture and governance.
All employers must appreciate that wage theft (whether inadvertent or not) is only considered a criminal offence under legislation if it involves deliberate and dishonest conduct. Where the employers actions are proven to be honest mistakes or actions taken with due care and diligence, it will not be seen as breaching legislation. Employers who deliberately underpay employees or dishonestly withhold employee entitlements could be faced with jail time, as well as whatever fines might apply.
Wage Theft in Queensland
In Queensland, research indicates that with around one in four workers are being paid incorrectly; costing the economy $2.5 billion a year (comprised of unpaid wages and unpaid superannuation). The Queensland government has responded to this issue by introducing the Criminal Code and Other Legislation (Wage Theft) Amendment Bill 2020, which makes wage theft a criminal offence [learn more] . This legislation has seen some businesses heavily penalised – e.g. a Brisbane-based restaurant fined more than $200,000 [learn more].
Wage Theft in Victoria
Workers in Victoria are said to be losing out on $1 billion per year – e.g. . a restaurant facing a $1,000,000 fine for underpaying younger staff [learn more]. The Victorian government has responded to this issue by introducing the Wage Theft Act 2020, making wage theft as a criminal offence.
Wage Theft in New South Wales
It is estimated that NSW workers lose $1.2 billion per year due to wage theft. The New South Wales government has responded to this issue by introducing stricter tax laws designed to combat this practice. Wage theft has not yet been made a criminal offence. While not criminalised in NSW, there are still repercussions with fines of $100,000 or more.
The Woolworths Case
The Woolworths Group is one of Australia’s largest supermarket chains, with more than 1000 stores across the country. In 2019, the Fair Work Ombudsman (FWO) conducted an investigation into Woolworths’ self-reported underpayment of staff. The investigation found that Woolworths had underpaid nearly 6,000 staff members by a total of $300 million over nine years. These underpaid wages have since inflated to more than $570 million, resulting in more recent investigations being launched.
The FWO found Woolworths had been paying staff based on the outdated “zoning” system, which pays staff based on the location of the store they work in, and not for the work they do. This system resulted in many staff being underpaid for overtime and penalty rates, which can significantly impact their overall pay. Additionally, Woolworths had not kept accurate records of staff hours, making it difficult for the FWO to determine the extent of the underpayments.
In response to the original investigation, Woolworths Group settled the claim of wage theft, for $300,000,000. They also decided to pay out an additional $50,000,000 to past and present staff.
Akyra’s Key Takeaways
- Employers need to monitor four important areas to avoid underpayment risks and potential wage theft issues: employment arrangements, remuneration systems, payroll and record-keeping, and workplace culture and governance.
- Employers need to take responsibility for ensuring their payroll systems are accurate and their staff are paid fairly.
- State governments across Australia have introduced laws to combat underpayment of wages.
- HR consultants like Akyra play an important role in helping employers prevent and address wage underpayment and its repercussions.
The prevalence of wage underpayment in Australia is a serious issue that requires attention from both employers and government regulators. The listed cases and increased attention from the government illustrates the widespread nature of this problem. Employers must recognise that underpayment of wages not only harms workers but undermines the integrity of the labour market and the economy as a whole.
Employers should take responsibility for ensuring their payroll systems are accurate and employees are paid correctly.
HR solutions providers like Akyra can play an important role in helping employers to prevent and address wage theft by providing accurate record-keeping and compliance services.
Disclaimer – Reliance on Content
The material distributed is general information only. The information supplied is not intended to be legal or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice in relation to your specific situation.