Anatomy of a wage theft: Australian businesses at risk of criminality

As of January 2025, some Australian employers could be branded criminals and face paying up to three times the cost of the value of underpayments to staff. From what I'm seeing, it's time for the alarm bells to go off.

I've spent recent months working with a range of major private and ASX-listed companies from supermarkets to airlines, food and beverages producers, media enterprises and more on their workforce management strategies and getting prepared for what's coming.

Looking under the hood, I often see what can only be described as dog's breakfast meets deniability. In one example, our team found no mechanisms to accurately compensate for time-in-lieu despite it being a legal obligation, trade workers being paid by the wrong – sometimes completely irrelevant – award rules, no awards rules in place across multiple departments, and more.

Often, no one seems to know who creates and should be responsible for these processes and how these issues manifest. The blame game begins – we often cop a share of it just for holding up the mirror – and the can gets kicked down the road as the issue is often oversimplified or not enough budget is put aside to properly deal with it.

The Fawlty Towers guide to paying people in Australia is not uncommon either. There's a tendency to think payment compliance is easy, but it's anything but after decades of complex labour laws and a lack of ownership between boards, directors, HR and payroll departments, legal, IT, and industrial relations (IR) to manage the people, payment, and compliance pillars that dictate what and how people are paid.

Like any industry, technology plays an important role in this process, but therein lies a big part of the issue. The processes are thought to be automated and often left unchecked, but there's nothing that actually connects Fair Work rules, awards systems, and payment mechanisms. If there's an issue, it festers.

Most staff don't realise they're underpaid, so the reports we've seen on organisations including Domino's, Woolworths, Commonwealth Bank (CBA) and countless others underpaying staff are merely a fraction of the real issue. In fact, many staff are actually overpaid and less likely to raise their hand to flag it.

But now, employees across Australia have a greater incentive to seek compensation for underpayments, knowing they have greater backing from Fair Work and the potential to receive up to three times the value of those underpayments.

We are in the calm before the storm as wage theft criminalisation laws become enforced with boards and directors unprepared or unwilling to fix systemic issues. It's conceivable people have been even waiting quietly for the new laws to kick in to maximise their return.

It's important to acknowledge the practice of underpayment is rarely deliberate. Employers don't want to underpay – the ramifications even before these laws kick in aren't worth it, and most operate in competitive markets where noticeable underpayment lead to people churn and lower productivity. The term 'wage theft' gets bandied around, but really, it's not all that accurate, as systemic issues and ignorance are the root cause.

Yet ignorance doesn't excuse criminality. Directors, boards, HR and payroll teams, HR compliance experts, and more need to sit down and take a good hard look at where they stand. While requirements differ across industries and the types of employment arrangements in place, getting this right typically centres on three areas.

Negotiation is when the industrial instrument, including award rates and enterprise agreements, as well as any negotiation over and above the minimum award rate, are considered.

Payment involves the mechanism to work out payment rules and actually pay staff. Workforce management and payroll technologies are involved in this part of the process.

Reconciliation refers to the review of payments to ensure they are, and remain, compliant with the industrial instrument determined in negotiation and in accordance with Fair Work rules. This is where many companies trip up, often owing to issues in steps one and two, and reconciliation happens through litigation and underpayment compensation.

Clearly – and it's a poorly kept secret in the industry – there is nothing connecting the dots on these three areas. No traceability, no compliance roadmap, no trigger that alerts employers that they could be at risk.

That's a failure and missed opportunity of the workforce management industry, but regardless, Australian leaders need to take time to understand and fix their organisations' payment practices.

The benefits of doing so go far beyond avoiding underpayment penalties, too. Productivity, trust from employees, and positive reputation can rise if there's a genuine recognition and effort to pay people what they're owed, particularly during a cost-of-living crisis.

Sadly, this realisation may only dawn on some leaders when they're sitting in a courtroom facing higher fines and criminal action.