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Wage underpayments epidemic in Australia

Byline: Arthur Hambas, Lawyer at McDonald Murholme

When Victorian Premier Daniel Andrews commented that “every worker has the right to get a fair day’s pay for a fair day’s work”, it drew the public’s attention to an issue that has been plaguing a significant number of Australian workers for some time.  

While most employers do the right thing by their employees, there is still a significant number who may be advertently or inadvertently underpaying their employees.  Employers must ensure that they are educated when it comes to paying wages and be aware of consequences when they do not pay employees correctly. Wage theft doesn’t only constitute underpayments, it can also include sham contracting, unpaid superannuation and the misuse of ABNs. Furthermore, the unions have also been pushing for up to 10 years jail time for employers found guilty of wage theft in an attempt to put a stop to the epidemic.

According to the ‘Wage Theft in Silence’ report, conducted by The University of Sydney, international students, backpackers and other temporary migrants were especially vulnerable when it came to wage theft. The report found that a quarter of international students and a third of backpackers were earning $12 or less per hour, around half the legal minimum wage. Overwhelmingly, young workers are also exploited, an annual report by the Fair Work Ombudsman found that young workers, under the age of 25, make up 15% of the workforce yet are involved in 28% of workplace disputes.

A large percentage of workers who are underpaid are working in the hospitality industry.

Recent examples of underpayments

Recently Australian business Tokyo Sushi was fined by the Fair Work Ombudsman more than $380,000 for underpaying employees more than $70,000.

Similarly, franchise Chatime was found by the Fair Work Ombudsman to have underpaid employees by more than $46,000, allegedly paying some employees as little as $13 an hour, without casual loadings or public holiday penalty rates.

In addition, Fair Work Ombudsman recovered $331,386 in wages for 725 underpaid workers after conducting surprise audits in workplaces located in Albury-Wodonga, Ballarat and Wollongong exemplifying the ongoing underpayments epidemic on Australia. Over 55% of the businesses found to be underpaying staff were in the hospitality industry.

While all of these businesses showed blatant disregard for minimum wage standards set by Fair Work Australia, some businesses may be inadvertently underpaying their employees. Commonly, employers make errors when paying causal employees by either classifying them incorrectly under the award or by not paying correctly for overtime or penalty rates.

What can employers do?

Businesses need to be proactive when it comes to correctly paying wages and not wait to be audited before rectifying underpayments.

According to Fair Work Australia, employers must follow the below steps if they find that they have been paying their employees incorrectly:

  • Step 1: Work out how long the employee has been underpaid
  • Step 2: Work out how much the employee was actually paid
  • Step 3: Work out how much the employee should have been paid
  • Step 4: Calculate how much the employee has been underpaid
  • Step 5: Backpay the employee
  • Step 6: Keep up-to-date with future wage increases

Employers must also ensure that their employees are paid for all time worked including training in team meetings, opening and closing the business and working unreasonable trial shifts.

If an employer is concerned about their responsibilities when it comes to paying wages they should check their enterprise agreement or other registered agreement. Alternatively, The Fair Work Ombudsman has brought in a new interactive tool to check that employers are paying employees right under the award.

Employers should also be aware that as of the 1stJuly 2019, there will be a 3.0% increase to the minimum wage in Australia, with the new national minimum wage increasing to $740.80 per week or $19.49 per hour.

If employers are unsure about their employees’ wages and their employment contracts, seeking legal advice is recommended.

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