In its 2019-2020 pre-budget submission, the Australian Chamber of Commerce and Industry (ACCI) has called upon the Federal Government to take more action to address the underpayment of employees.

It says that it “supports the Government working to stamp out exploitation of Australians at work, particularly amongst younger people”, but that “there is clear and increasing community concern that underpayments are too frequent and widespread” and that there is “an expectation that there is a ‘tough cop on the beat’ in this space”.

The ACCI has recommended that the Fair Work Ombudsman (FWO) receives funding to provide an additional 50 workplace inspectors, so it can “respond more proactively and strategically to the breadth of this serious problem”, focusing on non-compliance in specific industries.

“More inspectors will also simply put more boots on the ground, more employees will be prompted to check and raise concerns, and more employers will be prompted to check they are getting it right.”

“This should include a pilot program to hire inspectors fluent in key languages other than English, to work with migrant workers and communities, and ensure that migrant workers in particular are better protected from underpayments, and more confident to query pay and conditions,” it said.

Temporary overseas workers the most exploited

The Wage Theft in Australia report, published in 2017 by senior law lecturers at the University of New South Wales and the University of Technology Sydney, found that temporary migrant workers, who comprise up to 11% of the Australian labour market, were the most underpaid.

Almost one third of these workers were paid less than half the minimum wage.

The worst cases of underpayment were in fruit and vegetable-picking and farm work, where it was found that 15% of workers were paid $5 per hour or less.

Another academic report, The Wages Crisis in Australia, published by the University of Adelaide Press in November last year, says that these labour markets can be characterised as “predatory business models” that “seek to take advantage of weak bargaining power amongst employees … to minimise labour costs and to improve the position of the business in competitive product markets”.

Wage theft is endemic in many Australian businesses

The Wages Crisis in Australia report states that “the problem of underpayment reaches well beyond a small number of employers” and that “it is a widespread and systemic problem, which has become embedded within certain industries, often in association with forms of business organisation that diffuse and obscure responsibility, such as franchises, chains of subcontracting and labour hire.”

“As more businesses achieve cost reductions, their competitors are pressured to meet or beat the reductions. In a number of cases that have been exposed, business models in fissured work environments are built on illegal underpayment of workers — also known as ‘wage theft’.

“Significant parts of the economy appear to rely on wage theft, including the hospitality, retail, agriculture and franchising sectors.

“As companies have steered away from direct employment relationships and pushed workers towards engagement by other entities, the responsibility for complying with legislative standards has been splintered. As the fate of Woolworths’ trolley collectors, Myer’s cleaners and 7-Eleven’s store workers underlines, when responsibility for compliance moves from the larger, secure businesses to smaller, and sometimes, marginal operations, the risk of non-compliance soars. In its more extreme manifestations, life and limb are endangered.”

What to do about the problem

Authors of The Wages Crisis in Australia report say that “effective enforcement” is essential to tackling “systemic non-compliance”.

It acknowledges that increased funding of the FWO “would go some way” to improving enforcement efforts, but says that is “not enough to address the burgeoning enforcement gap”.

“[I]t is vital that the Fair Work Ombudsman continues to focus on proactive detection methods, such as targeted auditing and in-depth inquiries, which do not rely on workers raising complaints or acting as workplace protagonists, which tend to atomise claims and drain resources.”

The report notes that employees who make underpayment claims are currently prevented from recovering their legal costs and that “Awarding costs might encourage or enable more private legal practitioners to help workers pursue enforcement proceedings. It would also be desirable to provide a fast, informal and low-cost option for enforcement proceedings, especially those involving small sums of money”.

Unions can also play an important role, the report states. “In terms of detection, trade unions are in a pivotal position given their ability to reduce information costs, their proximity to the workforce, their independence from employers and government, and their capacity to collectively agitate claims on behalf of a group of affected workers”.