What the Albanese government can do to end wage ‘theft’

The Fair Work Ombudsman’s frustration over big employers self-reporting underpayments to employees was made clear in a recent Senate committee report. The FWO lamented the procession of corporates self-disclosing and says it emphasised the ‘widespread nature of wage theft in Australia’. 

Wage theft accusations have been levelled at some of Australia’s biggest employers and best-known brands, among them Wesfarmers, Coles and Woolworths, Qantas, National Australia Bank and the Commonwealth Bank.

Not-for-profit organisations also haven’t escaped. Allegations have been levelled at the Australian Broadcasting Corporation, The National Library of Australia, and even government departments. 

All these employers have admitted underpaying employees and have taken remediation action to ensure those affected are compensated, as they should. 

But these are not the actions typical of a thief — because the ‘theft’ is not deliberate. 

Complexity abounds

Under the Fair Work Act, employers must take all reasonable steps to comply with their obligations, which may include steps such as undertaking payroll compliance reviews

But the complexity of the awards that outline minimum pay rates and conditions of employment result in many employers unknowingly underpaying their workers.

Deliberate wage theft is a grave issue. In 2020-21, Fair Work Australia conducted more than 4000 investigations involving workplace disputes and a further 874 compliance activities in high-risk sectors, clawing back nearly $150 million in unpaid wages. 

Heavy fines and potential jail time are among the consequences, not to mention serious reputation risk to directors and the company. If a corporate employer found to have deliberately breached the Fair Work Act, a manager can also be held personally liable.

Up to 25% of the cost of remediation is compliance — that could be thousands of dollars, or millions. Many companies need to increase their payroll headcount and invest in technology to comply.

Deliberate underpayment is an enormous risk but for most employers, uncovered errors are rarely intentional. Some in the community may be sceptical but in an employment market where businesses cannot hire quickly enough, it just would not make sense to deliberately underpay staff and risk reputations being torched.

But if the complexity of the awards that outline minimum pay rates and conditions of employment result in large corporates unknowingly underpaying their workers, what hope to small to medium businesses have?

The task for the new government

The digital package included in the March budget, and supported by the Labor Party, does nothing to support the real transformation needs of business, and will likely get swallowed up by spending on compliance.

It is little wonder that there is a huge negative sentiment around payroll compliance. 

Directors of companies and not-for-profit organisations are fearful about turning over that rock because they dread finding errors and suffering those accusations.

It is always in the business’s best interests to audit for compliance, but businesses spend time and dollars trying to comply with and interpret dozens of different awards.

The level of complexity for payroll compliance is beyond the capability of most digital payroll systems. Most organisations that get it wrong do so unintentionally and make every effort to remediate outstanding entitlements, but nonetheless they are publicly vilified for ‘wage theft’.

This is companies and payroll software being unable to decipher unnecessarily complex awards. Even through a legal lens, the awards are open to interpretation.

The solution is straightforward — the incoming government must make it a priority to simplify these awards. Superficial solutions over such a complex maze will only compound the compliance problem.

But there also needs to be a greater level of respect and understanding for those who are proactive in conducting compliance audits, even if errors are uncovered. 

Employers are already on the back foot in getting their compliance checked, as they try to administer a system of maddening complexity. 

If inadvertent errors are uncovered and a plan is in place to rectify the situation, bashing the employer will only discourage others from coming forward.