wage theft protest underpayment
(Image: United Voice)

More than a quarter of small and medium businesses in Australia may be underpaying their staff, as a steady drip of data from Fair Work Ombudsman (FWO) raids across the country paints a picture of widespread refusal by business to pay its staff properly.

Last Friday the FWO released the results of a monster inspection campaign targeting businesses in regional Queensland, Victoria and NSW, revealing that 22% of 1385 businesses inspected were underpaying staff. That was in addition to other breaches of workplace laws found, such as inadequate record-keeping.

The mega-raid is only the very latest of dozens of enforcement actions undertaken by the FWO in response to revelations of widespread rip-offs of workers by 7-Eleven and other major franchisors in 2015. Crikey has compiled the results of all FWO raids and investigations since the start of 2018, which have covered not merely the wage theft hotspots of hospitality, personal services, fast food and retail, but textiles, agriculture, construction and manufacturing.

The results are disturbing: a total of 4975 businesses have been investigated since the start of 2018 and more than 27% were found to be underpaying employees. The worst sector is sushi outlets — an investigation of 45 outlets in 2018 found 82% were not paying their staff properly.

The problem is also severe in regional areas: while an investigation of 600 regional business released in January showed underpayment in 24% of cases, a mid-2018 investigation of 626 regional business found underpayment in 31% and an examination of nearly 640 agricultural employers found underpayment by 41%. Worryingly, a 2018 re-audit of 479 businesses that had already been found to have failed to comply with workplace laws found 24% were still underpaying staff.

The results do not include and investigations of individual companies and franchise networks such as Caltex, which found less than a quarter of outlets complied with workplace laws. However, investigations this year are showing a slightly improved level of non-compliance, averaging 22%. This suggests the heavy campaign of investigations by the FWO might be starting to improve the situation on the ground.

The widespread level of non-compliance isn’t just bad news for workers — frequently temporary workers or foreign students — but for the 70%+ of businesses that pay their workers fairly. “Our audits have established a link between prices and wage underpayments,” Ombudsman Sandra Parker said in announcing raids on Melbourne cafes and restaurants in December.

Peter Strong of small business group COSBOA says the issue has been vexing them for years.

“Most businesses in most sectors are paying the right money – the problem is in hospitality, harvest labour and highly competitive, low margin industries,” he says. “We did a serious round table in 2017 on this. Industry associations need to be driving this, and not just with words condemning it. Some associations need to have a long hard look at themselves — they’re reluctant to talk about it because they think it will upset members.”

Some are being proactive, however: he notes petrol retailer body ACAPMA, in the wake of the Caltex scandal, has started auditing members itself (Caltex has also entered an agreement with the FWO for strengthened compliance as it moves away from a franchise model). Strong says a major systemic issue is complexity around awards, which make it hard for small business people who want to do the right thing to be certain about the right wage for each employee.

“Unions and some industry associations benefit from that complexity, though, so there’s a disincentive to address it,” he says. “I don’t want to put it on employees, because ultimately it’s about businesses doing the right thing, but a lot of small businesses also get approached by people wanting to work for below award rates or work extra hours on the cheap or work cheaper for cash. A lot of the FWO enforcement action comes from investigations, not complaints from workers. But we’ve got to support the regulator, simplify awards — Gillard did a lot of that — and also clarify the issue of contractors versus employees, which is an area of complexity and also exploitation.”

Meantime the FWO’s campaign goes on. Yesterday it pinged two Sydney hospitality industry software companies for underpaying two Korean workers over $34,000. The exploitation of workers, especially foreign workers, continues apace.

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