What is wage theft & how can employers meet workplace obligations?

Author: Harrison HR | Blog

We’ve all seen the recent headlines - large companies like Woolworths, Domino’s Pizza, 7-11 and George Calombaris's hospitality group publicly admitting to underpaying thousands of employees to the tune of millions of dollars.

Many employees and employers alike have wondered - how can such mistreatment happen in this day and age? How have these businesses been getting away with it for so long?

The sad truth is that wage underpayment, or ‘wage theft’, is an all too common problem. It’s been found that casual workers in the retail and hospitality industries and workers employed by franchises are at a much greater risk of experiencing wage theft.

It’s important to be aware that businesses both large and small fail to comply with workplace regulation. If a company as large as Woolworths can get it so wrong, any type and size of employer can too.

Whether these instances of wage theft are the result of genuine misinterpretation of workplace law or deliberate misconduct is debatable. Regardless, these headlines have brought the issue to light and given many employers pause to consider whether they need to review their internal HR practices to ensure compliance is being met across the board.

How and why are these mistakes being made by employers?

Most instances of underpayment are the result of a lack of knowledge and the majority of employers are quick to remedy these. Unfortunately in the most recent high profile cases of wage theft, the mistakes being made were due to systemic internal failings to understand and adhere to workplace regulations over a significant period of time.

While these employers were often paying their employees the correct minimum pay rate, they failed to take other entitlements into consideration such as penalty rates, overtime, allowances, lead payments and leave loading.

In one recent case for example, the ABC admitted to underpaying nearly 2,000 casual staff. Affected employees were paid a “flat rate” instead of the correct penalty rates and overtime based on hours worked.

This failure to correctly pay casual staff their entitlements has been a common trend in these wage theft stories. However, in the case of Woolworths, the retail giant revealed it had underpaid around 5,700 salaried staff.

Investigations uncovered that Woolworths was telling salaried workers they were not covered by an award or agreement. In fact, all salaried staff employed by Woolworths are covered by the General Retail Industry Award.

The retail award sets out entitlements and a legal minimum rate that employers must pay at or above - even for salaried staff. Some Woolworths staff were not being paid this minimum salary and were also missing out on their entitlements such as shift loadings, laundry allowances, cold area allowances, meal breaks, overtime and extra leave for shift workers.

So a key takeaway here is – even if you pay your staff a salary, it doesn’t mean your staff are not covered by an award. They must be paid the minimum salary as set out in the award and they must also be paid any relevant entitlements.  

 

What are the consequences of wage theft for employers?

Despite the extensive laws in place to govern against wage underpayment, it’s not actually a crime to underpay an employee.

If an employer is held liable for failing to pay its workers, a court can order that the business back pay its workers and can also issue the employer with penalties.

While these penalties can be significant, up to $63,000 per convention, they are civil penalties, not criminal sanctions.

Perhaps these penalties can be considered next to nothing for a company as large as Domino’s Pizza, but for a small to medium sized business, they can be devastating. 

The Fair Work Ombudsman has been coming down on corporations found to have committed wage theft. And in the wake of the 7-11 wage scandal, recent amendments were made to workplace laws that affect certain franchisors. Under these changes, there are additional provisions that mean franchisors can be held responsible for their franchisees' conduct and subject to enforcement action, court proceedings and penalties if their franchisees have contravened the Fair Work Act.

With community outrage high and unions pushing to make wage theft a criminal offense, it’s now more important than ever for employers to have their payroll systems and employee contracts up to regulation.   

How can I ensure my business is not underpaying employees?

To be completely confident you are meeting your compliance requirements with the Fair Work Act and avoid hefty fines, talk to us at Harrison HR about arranging a Pay & Award Audit.

As we have explored above, most cases of wage theft are due to systemic internal failures. An external and objective audit by a highly experienced HR consultant is the only way to properly identify any issues.  

Our Pay & Award Audit will help you ensure that your employees are being paid correctly and in accordance with the relevant industrial instruments.

As part of the audit process, we will:

  • Identify the modern award for each of your positions
  • Ensure you have classified all positions correctly
  • Identify the correct minimum pay rates you need to be paying
  • Ensure you are compliant with the Fair Work Act, modern awards and other obligations
  • Plus, we will develop employment contract templates and individual flexibility agreements to suit the specific needs of your business.

To request a quote for a Pay & Award Audit, simply click here.

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