Wage theft: could your business be guilty?

Wage theft can be deliberate or a lack of due diligence. Could your business be guilty?

Earlier this week the Fair Work Ombudsman (FWO) commenced legal action against Coles Supermarkets Australia Pty Ltd (Coles), alleging it underpaid more than 7,500 salaried employees a total of $115 million.

The FWO alleges that most of the underpayments were the result of Coles paying salaried employees annual salaries that were insufficient to cover their minimum lawful entitlements, given they generally performed significant amounts of overtime work.

And Coles isn’t the only one. Qantas, ABC, Commonwealth Bank, Lush, Super Retail Group, 7-11, Michael Hill, Woolworths, Grill’d…all have been found guilty of wages underpayments. Even Maurice Blackburn; a law firm specialising in worker’s rights, was found to have underpaid hundreds of part-time workers up to $1 million.

Whether you use the term “wage theft” or the more politically correct “wages underpayments”, here’s the thing: it simply shouldn’t happen with the regularity it does. It’s relevant to note that wage theft is not always caused by deliberately fraudulent behaviour and in some cases, results from a lack of due diligence by a business, its employees, and advisors. While this might be something of an excuse for the small business operator, there really is no justification for those businesses large enough to run their own payroll, have onboard HR and remuneration specialists and conduct the appropriate periodic compliance audits.

So is there a common thread to what we’re seeing in recent cases?

Fair Work Ombudsman Sandra Parker recently said underpayments resulting from insufficient annual salaries for employees covered by awards had become a persistent issue among businesses of all sizes, across a number of different industries.

“Businesses paying annual salaries cannot take a ‘set-and-forget’ approach to paying their workers. Employers must ensure wages being paid are sufficient to cover all minimum lawful entitlements for the hours their employees are actually working and the work they are actually doing,” Ms Parker said.

There’s little doubt many employers prefer the simplicity of paying their employees by annual salary rather than the varying hourly rates, allowances, overtime and penalty rates under an Award. Under a fixed salary arrangement, the time and expense of payroll administration is often greatly reduced. But getting annualised salaries right can be challenging…particularly if the employee has coverage under a modern Award.

Nothing stops an employer using annualised salaries to remunerate employees. Some Awards contain an “annualised salaries” clause that describes the steps the employer needs to take when considering this option. It’s not overly hard getting it right but you should consider whether you have the time and knowledge to do it correctly before you dive in head first. There are heavy penalties for wage theft, with these extending beyond the obvious reputational damage to significant fines and potential jail time. Both the Victorian and Queensland state governments passed legislation which made wage theft a criminal offense, with employers found to have committed an offence liable to up to ten years’ imprisonment. 

Think you might need some advice on your employee remuneration arrangements? Check out the “Annualised salaries” page on the Fair Work Ombudsman website. Or find yourself someone who knows what they’re doing.