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Inadvertent underpayment or wage theft?

What is wage theft?  It’s a relatively new term being used to describe situations where an employer is underpaying their employees.  If you are inadvertently underpaying an employee are you engaging in wage theft? It would appear so. Although the term appears to have been coined in the light of some very serious cases of deliberate and knowing actions by some unscrupulous employers to disadvantage their employees, it is now being used more liberally.

Let’s start with the obvious - employees should not be underpaid for any reason. This includes a simple calculation error or a lack of understanding of the Award system or the terms of a specific Award. The reality is that not all Awards are simple to understand, and this is particularly the case where employees may work varied hours from week to week. Some of the most complex calculations we have ever been asked to review have been for casual or part-time employees working in the retail or hospitality sectors.  It's not surprising that sometimes employers get it wrong. This is particularly so for SMEs who often do not have access to Human Resources or Industrial Relations professionals.

These errors, even the inadvertent ones, cannot continue. The Fair Work Ombudsman is currently undertaking a focussed campaign to identify and rectify what it calls ‘wage theft’ and this can include where the employer has made an honest mistake. Penalties for businesses has increased alarmingly in the last financial year to a total of $7.2million, which is an increase of 49% from the previous financial year.  The fines included one in August 2017 for $660,020 for a fruit market which failed to appropriately pay a migrant worker.

The public is becoming more aware of the services of the Fair Work Ombudsman to recover unpaid wages and therefore many more people are seeking to access those services. Employees are also more educated about their terms and conditions of employment now than ever before. Employees may not raise concerns about their conditions whilst they are employed for fear of losing their job. However, this barrier disappears when they move onto a new job. Underpayments can be claimed by employees who are no longer employed by the employer. Back payment of wages can be claimed for up to 6 years prior to the claim being made. Therefore, if you are not 100% sure that you are paying all of your employees correctly, it may be time to conduct an audit. Employers who identify and rectify underpayments without the need for intervention by the Fair Work Ombudsman are significantly less likely to be prosecuted.

If you have any concerns about the wages or conditions of employment being paid by your business, or if you just want the confidence of knowing you are meeting your legal obligations, there are a number of options available to you.  If this is your only or urgent concern, our HR consulting division, Providence HR, can immediately undertake an audit of your wages and conditions of employment.

Alternatively, if you are seeking broader HR assistance our HR division offers an outsourced HR service, providing you with a HR service specific to your needs which may include a wages and conditions audit.

For more information about our outsourced HR service known as Your HR please visit providencehr.com.au/your-hr/

If you would like to discuss the options available to you, please contact your usual Hanrick Curran advisor on 3218 3900 or our HR Division on 3218 3919.

Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.