Wage theft is now a crime

Wage theft is costing Australian workers $850 million a year, demonstrating an “ingrained culture” of deliberate underpayment and the need for criminalisation at the federal level.

Fair Work Ombudsman audits stretching back to 2009, shows that more than a quarter of audited businesses failed to observe the monetary obligations set out by industry awards or enterprise agreements. Its calculations show that nearly 27,000 businesses were found to have underpaid approximately 1.3 million Australian workers over that time frame.

Wage underpayment also stretches deep into the small business sector, with the Fair Work Ombudsman revealing it has leveled nearly $85,000 in penalties against two Victorian businesses accused of underpaying young workers, as a result of its latest investigation.

Cost to your business

The federal government’s upcoming industrial relations reform package is expected to contain legislation making wage theft a criminal offence across the board. Legislation containing the federal government’s wage theft provisions is expected to be tabled in Parliament by the end of the year.

For the most flagrant underpayments, the Bill will criminalise wage theft by introducing jail terms and significant fines for individuals and large businesses.

The offence will carry a maximum penalty of four years’ jail and/or $1.11 million fines for individuals, and up to $5.55 million for a body corporate.

For wage underpayments that do not constitute a criminal offence – such as underpayments that were perhaps not intentional or due to human error, penalties will be enforced up to $19,980 for an individual and $99,900 for a body corporates and small businesses.

What is wage theft?

In Victoria, from 1 July 2021, it became a crime to:

• deliberately and dishonestly underpay workers
• deliberately and dishonestly withhold wages, superannuation or other employee entitlements
• falsify employee entitlement records to gain a financial advantage
• avoid keeping employee entitlement records to gain a financial advantage

Victoria’s wage theft laws target employers who deliberately and dishonestly underpay employees and withhold wages and other worker entitlements.

Honest mistakes made by employers who exercise due diligence in paying wages and entitlements are not considered wage theft.

Pay and conditions

Employers must provide their employees with at least the minimum pay and conditions outlined in the  relevant award, workplace agreement, contract of employment or legislation. This includes an employee’s minimum entitlements as set out in the National Employment Standards (NES).

What are employee entitlements?

Entitlements are defined in the Wage Theft Act 2020 as an amount payable to an employee or any other benefit payable or attributable to an employee, including:

• wages or salary
• allowances and gratuities
• annual leave
• long service leave
• meal breaks
• superannuation

I think I’ve underpaid my employee

Employees have to be paid at least their minimum pay rates and entitlements.

Underpayments often happen because of a mistake or payroll error. Fixing it quickly and getting it right in future is important. Not following the law can lead to serious penalties.

If you think you have underpaid your employee, you can follow the follow the Fair Work Ombudsman’s step-by-step guide to fixing an underpayment.

What if my employees signed a contract to receive less pay and conditions?

The minimum pay rates and conditions in awards, legislation and registered workplace agreements cannot be overridden by a contract or by an agreement with the employee that provides for less beneficial entitlements

What are my record-keeping obligations?

Victoria’s wage theft laws don’t impose new record-keeping obligations on employers. Various pieces of legislation already require employers to keep employee entitlement records, including about allowances, annual leave and long service leave.

The wage theft laws make it a crime to deliberately falsify these records or fail to keep them to gain a financial advantage or prevent the exposure of a financial advantage.

Need help?

Fair Work Ombudsman generally found that employer non-compliance was due to a lack of awareness and understanding of award provisions, rather than employers acting maliciously.

If you believe you may be underpaying your employees and need help navigating your relevant awards, agreements or contracts, to ensure you are complying with the Wage Theft Act 2020, reach out to us for more information.

Written by Linda Davey