What is wage theft?
Wage theft is the act of employers not paying their employees the correct wage or entitlements for compensation of their work. This can occur from the withholding of wages or the refusal to pay other entitlements such as overtime, penalties, superannuation and allowances. The act of wage theft is a deliberate act of stealing. Alternatively, the more common threat to businesses, is the accidental underpayment of employees, occurring because a business has poor payroll controls, particularly if they operate in an industry with a complicated award they are required to comply with.
Why is the underpayment of employees on the rise?
Although the issue is not new, the number of cases has been on the rise in recent years. In 2021-22 alone, $582 million in unpaid wages were detected. The rise in wage theft can be attributed to several factors such as the increase in the number of complaints from employees, complexity of modern awards and the increase in accountability from Fair Work, which has been cracking down on businesses. In fact, there were 137 litigations filed by the agency in the last financial year, almost doubling the previous year’s total.
Who underpays?
The underpayment of employees is a concern for all businesses, regardless of their size. Companies like Woolworths, Target, Qantas, Country Road, David Jones and Coles have faced major wage scandals in recent years. Smaller businesses may not have the time, expertise, dedicated payroll departments or sophisticated systems to ensure mistakes are not made, which makes them more vulnerable to wage theft allegations.
Why is this a concern for my business?
Accidental underpayment of staff can happen to any business, but it’s important to understand the consequences of non-compliance. Many businesses fail to adequately pay staff due to lack of internal controls or a misunderstanding of their obligations, resulting in accidental underpayment of staff, . While this may seem like a minor mistake, the accumulation of unpaid wages over several years can result in significant financial penalties. It's important to prioritize compliance with awards to avoid these risks.
What are the consequences for non-compliance?
Non-compliance with the law can lead to severe consequences. Accidental underpayment can result in penalties that exceed the amount underpaid. Penalties can be up to $13,320 per infringement for an individual and $66,000 per infringement for a company. If it is deemed a serious infringement, there can be penalties of up to $133,200 per serious infringement for individuals and $666,000 per serious infringement for a company. This is on top of reputational damages, which can impact a business’s ability to attract and retain customers and staff. These penalties, together with unpaid wages potentially accrued over several years, can amount to large sums needing to be paid out which in some cases is enough to lead to insolvency.
How can we help?
If you are concerned about wage theft and non-compliance, our forensic services team can assist you in conducting a payroll review and internal audit. Our team can help identify areas of non-compliance, calculate any underpayments, and provide recommendations for remediation. We can also assist in the implementation of internal controls to prevent future non-compliance issues. By engaging our forensic services team, you can ensure that your business is meeting its obligations and avoiding potential legal and reputational consequences.
