Corporate wage theft: why it happens and how to prevent it

Corporate wage theft is a huge issue in Australia right now, with the likes of Target and Coles admitting to underpayment of their staff by millions. With companies under increasing pressure to fix any wage errors and improve their payroll processes, here’s a question for you: Are you confident you could survive a payroll audit?

If not, you’re not alone, but don’t worry. Let’s consider what corporate wage theft is, why it’s happening, and how you can pass a payroll audit by preventing underpayments from occurring in the first place.

What corporate wage theft is

Wage theft, or corporate underpayments, is when employers pay employees less than they’re entitled to under the country’s workplace relations system. It includes making unauthorised deductions and underpaying awards such as:
•  Salaries
•  Superannuation
•  Sick leave, carers’ leave, or other commissions and entitlements

If you’re found guilty of wage theft, it’s the company that’s responsible for paying the underpayments and fixing the problem. So, why do underpayments happen in the first place, and what can you do about them?

How underpayments happen

Corporate wage theft and underpayments happen for many reasons, but the biggest problem is Australia’s overly complex and antiquated award system. Here’s why.
As you probably know, Australia’s industrial relations system is how the work-related entitlements and obligations between employees and their employers are managed. The main issue comes from the complex list of pay rates. There are so many different pay rates and an overly complicated list of other awards, including rates of superannuation, overtime, allowances, and holidays.
What’s the issue? Put simply, many companies struggle to keep up with this excessively complex system.

This may be for one of two reasons:

•  You have younger staff members on your payroll team, and they’re less experienced at handling the industrial relations system.
•  You have a smaller HR team, and you’re not in a position to expand it.

Industry leaders support this position. According to the Australian Retailers Association’s chief executive, the current award system is too complex. There are multiple ways of interpreting the same awards, and rather than pushing for criminal sanctions, the Federal Government should be focusing on simplifying retail wage issues.

To complicate everything further, the Fair Work Commission (FWC) recently introduced new changes to annualised salary provisions, and the changes affect full-time employees. The changes are already in effect, and if you don’t implement them, you could be committing wage theft.

How to prevent wage theft and underpayments

Whatever the reason, even a simple slip in one employee’s pay can make your company liable for wage theft. Here’s how to prevent underpayments.

Audit your payroll

If you identify an underpayment, work out:
•  How many employees are affected
•  The size of the underpayment(s)
•  The source and nature of the entitlement
•  Why the underpayment wasn’t spotted earlier, i.e., consider your record-keeping

Get outside help

Make use of contract or interim HR professionals to temporarily bolster your HR department and help you clear up any payroll issues. It may also be a good idea to seek legal advice from an employment lawyer, or have an external auditor check your books.

Conclusion

Given that the Federal Government may consider introducing criminal charges and other serious sanctions against companies found guilty of wage theft, it’s an issue you must take seriously. That’s where we come in. Our contract and interim HR professionals can step in whenever you need them to help with all your payroll and reporting requirements, helping you sail through your next payroll audit. Contact us to find out more today.