Wage Theft: Financial Crime or Payroll Mistake?

Public discourse around wage theft generally devolves into accusations of big businesses ripping their employees off intentionally, but many other instances of the crime occurring are inadvertent, due to the complexity of Australia’s payrolling system.

Wage theft appears across a broad range of industries and disproportionately impacts young people, overseas students, migrant workers and women, in general.

It is legally defined as the deliberate and dishonest withholding or underpayment of wages from employees or the falsification or avoidance of keeping employer records in order to obtain an advantage.

In some instances, this underpayment is a deliberate action by companies or individuals. It can involve employers:

  • paying hourly rates below the national minimum rate;
  • failing to pay overtime and penalties;
  • making unlawful cash deductions from wages for things like breakages & accommodation;
  • paying cash-in-hand;
  • enforcing illegal cash-back schemes;
  • and failure to pay superannuation.

 In a large number of cases, however, this is caused by confusion at the payroll level.

The complexity of the legal documents that outline minimum pay rates and conditions of employment (awards) often results in many employers unknowingly underpaying their workers.

Typical mistakes that can cause this include:

  • Incorrect interpretations of how overtime should be calculated
  • Incorrectly classifying employees (casual or part-time, contractor, etc)
  • Mistakes made by payroll as a result of lacking data around dates and times of people working
  • Incorrect or mistaken applications of awards (or lack thereof) to an employee’s salary.

At state levels, there is specific legislation and amendments to criminalise wage theft, which could incite significant financial penalties for companies or individuals. It is treated as a crime in Victoria and Queensland, which means that employers in those states can face criminal charges, convictions and up to 10 years of imprisonment. It is currently up to the states and territories to police these offences as necessary, as there is no current federal legislation in place (this could change pending plans from Labor).

How To Avoid Committing Wage Theft

In order to maintain compliance with National Employment Standards (NES) and avoid further issues of compliance from underpaying workers, employers need to be proactive in understanding changes to industry awards and employee classifications.

Companies need to have an ongoing compliance regime regarding payroll. Employers need to be constantly revising their payroll systems and getting advice year on year to make sure that their processes are up to date and that employees are not underpaid. In some cases, seeking legal advice can dispel concerns about compliance that might otherwise be missed.

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