Understanding the new Wage Theft Act in Victoria
Payroll has been a popular topic for news outlets lately – and not for good reason.
Unfortunately, there has been an increase in situations where employees are being severely underpaid by their employer. Whether it is underpaying staff their hourly rate, or not paying the correct Superannuation, employees are being left short-changed in a range of different industries.
This may sound like a distant issue for larger countries overseas, however, regrettably, this is happening right on our shores, in local Australian businesses.
That’s why in March 2018, the Andrews Labour Government sought legislation to criminalise Wage Theft, making Victoria the first Australian State/Territory to act on this issue. On July 1st, 2021, Victoria’s wage theft laws officially came into effect, a massive step for Victorian business owners and workers alike.
So, what does this new law mean for businesses, and what do Employers need to do? Today we’ll cover all your questions, including:
What is Wage Theft?
Real life examples of Wage Theft
What are the new Wage Theft laws?
What do business owners need to do?
What are the penalties and repercussions for business owners engaging in Wage Theft?
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What is Wage Theft?
Let’s start with the basics. ‘Wage Theft’ was originally defined by two investigative journalists, Adele Ferguson and Ben Schneiders, who were the key drivers in exposing this workplace issue to the broader nation and general public.
“Wage Theft can be defined as the practice of paying workers less than they are entitled to, as per the Australian Workplace Relations system. ”
This is not just limited to underpaying wages however, and can include underpaying penalty rates, superannuation, overtime and other entitlements.
Examples of Wage Theft
Over the last few years, Wage Theft has received considerable media coverage, involving some of Australia’s most well-known companies.
ABC’s Four Corners program revealed big franchises such as Domino’s, Caltex, Bunnings and Super Retail Group have all had numerous underpayment cases. Some of the more recent, high-profile case studies include:
Coles – Underpaid 600 staff (approx.) a sum of $20 million over 6 years
Qantas – Underpaid 638 staff a sum of $7.1 million over 8 years
Commonwealth Bank – Underpaid 41,100 staff (current and former employees) a sum of $53 million
Woolworths Group – Underpaid 5,700 staff (approx.) a sum of $200-300 million
These big companies are just some (of the many!) that had severely unpaid their employees, leaving many questioning why these businesses hadn’t faced any repercussions for their actions.
What are the new Wage Theft laws?
Employers, at a minimum, must provide their employees with the minimum pay and conditions outlined in the relevant award, workplace agreement, contract of employment or legislation.
In support of this, on the 1st of July 2021, Victoria introduced a new Wage Theft Act, criminalising the act of underpaying employees or withholding entitlements.
This new law means that is has become a crime for employers in Victoria to:
Deliberately and dishonestly underpay employees;
Deliberately and dishonestly withhold wages, superannuation or other employee entitlements;
Falsify employee entitlement records to gain a financial advantage; and
Avoid keeping employee entitlement records to gain a financial advantage
What do business owners need to do?
To ensure you comply with these new laws, Victorian business owners should:
1. Become familiar with the new Wage Theft Act – Employer Information can be found here.
2. Speak with your payroll team and ensure that employees are provided with no less than the minimum pay outlined in their relevant award and contract agreement. The agreement must be kept on records, this applies for leave entitlements as well.
3. If you have any doubts, or your payroll capability isn't highly experienced, then you need to get payroll advice to mitigate the significant risks. Melbourne HR can provide this advice, as can other consultants. Do some research and ensure you pick the right advisor for your business.
4. Consider signing onto a cloud-based platform, such as Deputy, to assist in managing your payroll and award complexities.
If you discover that you have underpaid employees, Fair Work Australia has provided a step-by-step guide on how to correct this. You must notify employees and negotiate back payments as soon as possible – do not delay.
To avoid any risk of underpayment, we recommend you monitor relevant awards/wage increases and maintain accurate records of wages and entitlements.
What are the penalties and repercussions for business owners engaging in Wage Theft?
If a business owner fails to comply with the new Wage Theft laws, they may receive harsh civil or criminal penalties, including:
Fines of up to $218,088 for individuals;
Fines of up to $1,090,440 for companies;
Up to 10 years’ jail.
These harsh penalties have the purpose of deterring Wage Theft and forcing business compliance. And so far, it seems to be working, with research proving that Wage Theft cases have dropped since the implementation of the new law and penalties.
There is a disclaimer attached to these penalties, however. These fines are used to punish employers who deliberately and dishonestly withhold wages and other entitlements. If it is found that an employer made an honest mistake and generally exercises due diligence in paying wages and entitlements, then this is not considered Wage Theft, and the penalties may not apply.
As a business owner, you want to ensure that your staff are fairly compensated for the work that they do. This new legislation should serve as incentive to take an active approach in reviewing your payroll and entitlements, and ensure you remain compliant with the latest laws and Awards. A regular review can save you hundreds of thousands of dollars in fines, or even jail time, later down the track.
If you need assistance reviewing your payroll, or have any questions about employee remuneration, contact Melbourne HR for a free consultation and quote.
PHONE: 1300 784 687
Nathan Morihovitis is a Full-Time HR Consultant with Melbourne HR
Edited by Nicole Torrington, Marketing Manager at Melbourne HR.