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Wage theft is pervasive in Australia, with new research suggesting 60% of Australians, and 76% of young people are going underpaid. Wage theft can have dire consequences for everyone involved - from employees who struggle to make ends meet due to lost wages to organisations that could face large fines or even jailtime. And the impact of wage theft doesn't end there - it can also have a ripple effect on the wider economy, leading to decreased consumer spending and a reduction in overall economic activity (research has calculated that underpayment could cost Aussies almost $1.8bn per year).
Wage theft can take many forms, from unpaid overtime to underpayment of wages, and it can occur in any industry, from hospitality to retail to construction. And while it is often associated with dishonest employers who deliberately break employment laws, it can also stem from errors or oversights in the payroll process.
The consequences for the organisation, and individual can be dire. If you’re not already reviewing your payroll procedures and employee entitlements - here’s why you should:
It's the Law
In Queensland and Victoria, wage theft is a criminal act. In Victoria, it is a crime for employers to dishonestly underpay employees as well as withhold super or other employee entitlements. And in both states, wage theft employers engaging in deliberate wage theft from their employees face the risk of up to 10 years imprisonment. Other states and territories are not immune. While there is no legislative framework criminalising wage theft in other jurisdictions yet, this has been one of the promises made by the Albanese government.
Employee Morale and Retention
Employees who don't receive the wages they are owed can become disgruntled and less productive. This can lead to decreased morale and a toxic work environment. Rumours can start. Frustration and resentment can set in. Motivation and productivity can flail. Relationships can sour. All in all, this can lead to increased toxicity and turnover. Unpaid wages can lead to employees feeling undervalued and unmotivated, leading to decreased productivity.
Unpaid wages can also lead to employees leaving their job, which can result in costly recruitment and training costs. The issues are far deeper than just one industry – they’re sector-wide.
Reputational and financial implications
For the organisation involved, underpayment, whether deliberate or accidental, can have dire consequences. In addition to facing severe damage to their reputation, these organisations can also face significant fines and penalties that can far exceed the amount of underpayment. For example, the first Victorian restaurant to be charged under new wage theft laws, Macedon Lounge is facing significant sums. If convicted, Mr Setia, the owner of Macedon Lounge, will face up to $218,000 in fines or as much as 10 years in prison, and the restaurant can be fined more than $1 million. The implications for bigger organisations are even greater. If convicted, the Commonwealth Bank of Australia could be fined up to $660,000 per breach under the Fair Work Act's provisions for serious contraventions of workplace laws. With the number of employees totalling 7402, this equates to a hefty sum for the bank. These examples demonstrate the importance of ensuring that workers are fairly compensated and that organisations must comply with relevant laws to avoid costly penalties and reputational damage.
If you're an employer looking for a way to ensure errors or oversights in the payroll process don’t result in wage theft, contact us. We’re developing the next generation of payroll compliance software. Sweep helps employees and employers identify issues, collaborate to agree on workplace conditions, and resolve any potential disputes around underpayment and worker entitlements themselves, all guided by accessible interactions with employment law standards.
Say goodbye to the stress and frustration of wage theft and hello to accurate pay with Sweep.
Businesses should be aware of the legal, morale, retention, reputation, and productivity implications of not addressing wage theft. Unpaid wages can have a devastating effect on employees, businesses, and the economy as a whole and should be taken seriously. By taking steps to ensure compliance with wage and hour laws, businesses can protect their employees and their bottom line.
If you're a business owner and looking for a way to ensure errors or oversights in the payroll process don’t result in wage theft, get in touch with us. We’re developing the next generation of payroll compliance software. Sweep helps employees and employers identify issues, collaborate to agree on workplace conditions, and resolve any potential disputes around underpayment and worker entitlements themselves, all guided by accessible interactions with employment law standards.
