Annual wage theft toll hits $850 million as criminalisation bill looms

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, according to a damning new report from the McKell Institute.

A fresh analysis of Fair Work Ombudsman audits stretching back to 2009 shows more than a quarter of audited businesses failed to observe the monetary obligations set out by industry awards or enterprise agreements, according to the think tank.

Its calculations show nearly 27,000 businesses were found to have underpaid approximately 1.3 million Australian workers over that time frame.

The real level of wage underpayment is likely higher, McKell Institute CEO Ed Cavanough said, as the analysis did not cover the underpayment of penalty rates, or circumstances where payment under a different award would have been more appropriate.

“This is an extraordinary amount of money being stolen and it’s unacceptable,” Cavanough said in a statement.

Wage underpayment hits businesses big and small

The report arrives against a backdrop of high-profile wage underpayments claims, with Coles, Target, and Bunnings just a few of the major brands to have revealed significant wage underpayments in recent years.

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

The Ombudsman recently launched a spate of undercover campaigns targeting small restaurants and food court vendors deemed to offer suspicously low-cost fare.

The McKell Institute argues laws criminalising wage theft across the board are necessary to discourage employers from deliberately withholding earnings and entitlements.

The report throws its weight behind the federal government’s upcoming industrial relations reform package, which is expected to contain legislation making wage theft a criminal offence across the board.

If that legislation comes to pass, it will make good on a promise Albanese himself made in 2021, and provide a national backing to the patchwork of state-based laws criminalising the practice.

“Until we have federal legislation in place which criminalises wage theft, workers remain vulnerable, and the ingrained nature of wage theft culture will remain in the workplace,” the report says.

Broad support but concerns remain

A federal crackdown on wage theft enjoys broad political support, and a Coalition-led push to outlaw the practice in 2021 was only dumped due to conflict over other measures contained in the reform package.

Business representatives broadly agree that deliberate wage cheats should be stamped out, as they not only harm workers but undercut competing businesses that do the right thing.

The scuppered Coalition proposal to outlaw wage theft enjoyed particular support among small business advocates, including the Council of Small Business Organisations Australia (COSBOA), whose former chief executive Peter Strong argued it would stop bigger competitors from gaining a commercial advantage by underpaying staff.

However, employer groups have long argued that any upcoming reforms, led by Minister for Employment and Workplace Relations Tony Burke, should not unduly punish businesses for honest mistakes.

“If we’re going to have a discussion on wage growth – or wage theft, or insecure work – we also need to be having a discussion on how to reform our industrial relations system to make it work for small business people,” COSBOA said ahead of the 2022 election.

“The major problem we have in IR is complexity.”

Consultation papers released by the Department of Employment and Workplace Relations indicate the federal government is considering how to penalise unintentional wage underpayment separately to deliberate wage theft.

In its report, the McKell Institute also acknowledged the 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”.

However, complexity in Australia’s award and enterprise agreement systems is ultimately no excuse for deliberate wage theft, the report added.

“The McKell Institute continues to support moves to criminalise wage theft as a way to show zero tolerance to the practice,” the report says.

Legislation containing the federal government’s wage theft provisions is expected to be tabled in Parliament by the end of the year.