Wage theft accusations are not new in Australia. That doesn’t change the fact that it can leave bruised brands and big dents in bottom lines. Small cafés to giant international organisations have been targeted. Their HR policies have been investigated with particular focus given to overtime payment. Industries such as the hospitality industry are hot targets with wage theft and exploitation accusations.
Wage theft can take various forms such as underpayment of wages, having entitlements such as leave and penalty rates withheld, and an employer not making required superannuation contributions on an employee’s behalf.
Business owners need to address two questions: What brings about wage theft? How can the business solve this?
Wage Theft Sources
An interesting example was brought to the public’s attention via a very public protest in Northcote, UK. Former staff had misunderstood the company’s award system (or the company hadn’t been clear enough?). Staff thought weekend portions of wages could be traded for staff meals. In addition, the staff members were unclear on the wage rates. This lack of clarity is a quick way to get a labour complaint against you, even if it is an unwitting lack of transparency.
The Chamber of Commerce Chief Executive Greg Bicknell commented that “The award system is quite complex for small businesses to use.” There are other examples where businesses themselves have misunderstood their complex rewards system, short paying staff thousands of dollars.
A globally published wage theft incident occurred with Lush cosmetics stores. They purportedly unwittingly underpaid $2 million to 5,000 workers. This was apparently due to a glitch in its payroll system brought about by a 2010 transition to Modern Awards.
Another incident in the international media is that of the Super Retail group. This, again, was due to the company not correctly interpreting their own complex award system. Other areas where they tripped up were overtime, allowances and time in lieu. This purportedly was also due to miscalculations.
Wage theft scandals (only the tip of the iceberg)
- February 2020 – high-end restaurant Dinner by Heston Blumenthal in Melbourne allegedly underpaying its staff by A$4 million
- February 2020 – Supermarket giant Coles reveals staff payment issue, sets aside $20 million to cover costs
- February 2020 – George Calombaris’ restaurant group, Made Establishment, has gone into voluntary administration following an ongoing underpayment scandal.
- February 2020 – Target will be forced to pay back at least $9 million to employees after it discovered an issue with its payroll.
- June 2020 – Supermarket giant Woolworths has revealed another blowout in its wage theft scandal, admitting it owes $390 million to short-changed workers after uncovering more in its hotel’s division.
Ignorance Is Not A Legal Plea
As we all know, pleading ignorance of a law or business fault does not protect your business from the responsibility. A very high end set of eateries Burch & Purchese Sweet Studio and Vue de Monde were put in the public eye when staff sued them. The claim is annualised salaries worked out to 38 hours of payment when 50 hours were being worked per week. In addition, 12-hour shifts were worked with no breaks.
The restauranteur Neil Perry also came under fire and settled on a 1.6 million dollar payback. This was also due to annualised salaries. The annualised system needs to be well understood by both staff and business owners, or you can easily make compounded errors.
There are lists of examples with payments in the millions: George Calombaris – $2.6 million back payment and a significant impact on his TV career. Bookings slowed down dramatically.
When is wage theft a crime?
New laws were passed in Queensland Parliament on 9 September 2020 amending section 391 (‘Definition of stealing’) of the Queensland Criminal Code to capture deliberate, intentional behaviour leading to under or non-payment of entitlements as a criminal offence. This could include where deliberate wage theft occurs through:
- unpaid hours or underpaid hours
- unpaid penalty rates
- unreasonable deductions
- unpaid superannuation
- withholding entitlements
- underpayment through intentionally misclassifying a worker including wrong award, wrong classification, or by ‘sham contracting’ and the misuse of Australian Business Numbers (ABN)
- authorised deductions that have not been applied as agreed.
The impact is far-reaching. Your access to talented, top quality resources also falls away. Partnerships and collaborations will be nervous about being associated with you.
From a federal government perspective, wage theft is being viewed as a criminal offence. Queensland’s Palaszczuk government had hearings after being contacted by 169 people requesting intervention with systematic wage theft. On 16 June 2020 the Victorian Parliament passed Australia’s first laws on wage theft, the Wage Theft Bill 2020, which creates a criminal offence for underpayment of employee wages and entitlements by employers.
Using Tech, Using Specialists
The Fair Work Commission has stated that businesses need to comply with the current system and fast. Modern awards complexity requires time, money, and effort. In 2018 a Payroll Benchmarking Report stated an estimated $36.30 cost per single payslip for SMME companies (<200 employees). Time, money and effort are also required to keep up with ongoing superannuation, and tax policies change.
There are automated systems to monitor time and attendance, employee rosters and apply modern awards. The setup is critical with regards to data quality and correct legal and administrative interpretation of company policies. A transition project with specialist stakeholders is recommended.
Responsibility And Trust
As a business owner, you are 100% responsible for paying your staff correctly. It is not the employees’ responsibility to notify you of a glitch that they didn’t see for years. What needs to be noted here however is that the new law criminalises ‘deliberate wage theft’ by an employer against an employee.
Investing in specialists to correctly review, setup, automate and manage your payroll, awards, contracts and HR disputes is a highly valuable insurance policy against public scandals in the future.
Having a reliable and fair HR Consultant for your business means happier staff, greater loyalty and the best service possible to your customers/clients.
To quote Rosie Ramirez, of Tanda software, it creates “a win-win situation because it maximises the bottom line without defrauding the front line…”
Get your payroll compliance reviewed starting today. At Fresh HR Insights [insert hyperlink to https://www.freshhrinsights.com.au/services/payroll-compliance-reviews/] we can protect businesses such as yours from wage theft mishaps or accusations.
We audit your compliance and give clarity and peace of mind to you and your staff. We can help your business set a solid foundation and support you effectively when faced with problematic employees, unfair dismissal [https://www.freshhrinsights.com.au/how-to-protect-yourself-from-unfair-dismissal-claims/] claims or harassment claims. This allows you to focus on growing the business.