Companies may think they’re safe from wage theft but they should think again

Friday, 19 June 2020

By Ronald Holtshausen

Although COVID-19 has dominated the headlines and presented far more pressing challenges to corporate Australia, it is a mistake to think that the ‘wage theft saga’ is a thing of the past. Those who choose to ignore this threat either intentionally or unintentionally could be left exposed to the significant consequences.

 
Despite the large number of Australian brands found to have committed ‘wage theft’ against staff, many companies still believe they are immune to the problem.
 
This isn’t due to a lack of awareness. The wage theft casualties of corporate Australia are well known; indeed, they dominated news headlines in 2019 and early 2020, as one brand after the other was seen to fall foul of Australia’s workplace laws (i.e. failing to pay allowances, not rostering employees appropriately under the applicable modern award or simply using the incorrect rates of pay under an enterprise agreement).
 
Woolworths, Commonwealth Bank, Subway, Domino’s Pizza, Qantas, Sunglass Hut, and the even the public broadcaster, the ABC, have been accused of underpaying staff to varying degrees.
 
New legislation passed in Victoria will see deliberate ‘underpayment of workers’ a criminal offence from mid 2021, resulting in fines up to $1 million for companies and employers who dishonestly withhold wages, superannuation or other employee entitlements, being sentenced to up to 10 years’ jail.
 
In addition, the Australian Attorney-General, Christian Porter, has put company directors on notice they might be held responsible for wage theft that happened on their watch as the Morrison government works on developing its own laws criminalising wage theft.
  
Doubtless, some senior executives view the wage theft saga with an unrealistic level of confidence. They may think they are not at risk of underpaying staff due to a high level of back-end compliance, the expertise of their payroll software, or the yearly audit that has given them a clean bill of health.
 
What this multitude of cases reveals is that wage theft is not only a serious issue, but one that Australian companies need to sit up and start paying attention to. Without diminishing the genuine dismay that many underpaid staff feel – and rightly so – it is remarkably easy for companies, even those with the best of intentions, to underpay someone if they don’t put proper compliance measures in place.
 
In fact, many Australian companies could be at real risk of committing wage theft despite their best intentions, owing to a number of reasons, not least of which is the way companies must constantly adapt and evolve these days.
 
In the early days of a business, an organisation will work hand in hand with their lawyers to set up HR and payroll systems under Australia’s workplace laws, but as the organisation grows and evolves to adapt to emerging markets and customer demands, the organisation’s fundamentals, structure and workforce demands may change with it. The question then is: Has the HR and payroll systems evolved with it, such that they still comply with Australia’s workplace laws?
 
Further complicating matters is the fact that Australian corporations have an astoundingly good reputation, which we are justifiably proud of. We rate highly on indexes such as the international transparency and corruption index, and as a result, we tend to take our reputation for granted, investing less in compliance and relying more on our track record than our counterparts in the US and Europe. Add Australia’s complicated industrial relations system into the mix – we have more than 100 Awards – and you can see how ripe the corporate environment is for unintentional wage theft.
 
If companies want to protect themselves against wage theft, they need to ensure they are receiving the right advice. Companies would be wise to receive annual audits from advisors consisting of both lawyers and compliance specialists to ensure that they are staying compliant with Australia’s changing Workplace laws (including applicable modern awards and enterprise agreements).
 
While software goes some way to assisting companies in ensuring payroll compliance – and I’m sure we will see more developments in this space – some of these software solutions are imperfect. Many cannot take into account minor deviations in working hours or arrangements, and cannot be applied retrospectively so will not assist with historical missteps. While good software is important, it needs to be coupled with reviews from forensic and legal experts to ensure it’s working efficiently.
 
In addition to the threat of being charged with a criminal offence, the FWA’s fines for wage theft can run into the hundreds of thousands of dollars, and while the financial hit is not insignificant, what is even more detrimental to a company is the tarnishing of the brand.
 
Both consumers and corporate Australia lose trust.
 
Furthermore, many of the banking industry and capital firms will be reticent to lend money to companies caught up in a wage theft scandal. Even those businesses that have never experienced problems with underpayments, will need to show concrete evidence that they have been proactive and have measures in place to prevent it from occurring.
 
 The silver lining, if you could call it that, to the succession of wage theft scandals and the new threat of committing a criminal offence, is that they force us all to address a problem that has been in the shadows for too long, nudging us all towards a more proactive stance to Australia’s complex industrial relations landscape.
 
Wage theft can easily happen for any number of reasons – software, confusion over Awards, poor auditing or HR advice – but at the end of the day the responsibility rests with corporate Australia to navigate this minefield and establish a fail-proof policy to protect both their staff and their business.