Wage theft reforms fail to fix ‘fundamental issue’, says BCA
The government must simplify Australia’s complex complex and ambiguous employment laws in order to rectify the nation’s persistent underpayment issue, says the Business Council of Australia.
Increasing penalties five fold and introducing criminal penalties for the underpayment of wages will fail to significantly reduce the rate of underpayments being made by businesses, the Business Council of Australia has said in a recently issued document on proposed workplace law reforms.
The government is planning to increase the penalties for underpayment up to $825,000 for individuals and up to $4.125 million for organisations. It released a consultation paper on the proposed reforms in April this year.
The BCA said that most underpayments are unintentional errors which are arising due to Australia’s administratively complex and difficult employment laws system.
“Australia has a persistent underpayment problem, with underpayments coming to light too often across all industries, not just in small businesses and large businesses, but also charities, government agencies, even trade union law firms,” BCA stated.
“Some underpayments are deliberate, but as many or more are entirely unintentional. This represents real problems for both underpaid employees and their employees, require substantial back payments, and detract from critical working relationships that deliver productivity and performance.”
The BCA noted there are 122 modern awards, thousands of separate minimum wage rates and complex and inconsistent approaches to which hours and rosters attract particular additional payments
“This has created such an administratively complex and difficult to apply system that mistakes are regularly made notwithstanding significant efforts and investments to comply,” it said.
“The complexity and regulatory impost of Australia’s employment laws can be eye-watering. The General Retail Industry Modern Award is 110 pages long and runs to over 26,000 words. The simplified pay guide that the Fair Work Ombudsman provides to help employers and employees interpret the Hospitality Industry (General) Award is itself 87 pages long and contains well over 1,000 separate wage rates and allowances to sort through and attempt to accurately apply.”
Many of the issues with underpayment are matters of dispute over the interpretation of agreements, the BCA said.
“This is very different to explicit underpayments by error of calculation or deliberate theft. The system needs to clearly differentiate between the two,” it said.
While fines were previously increased in 2017, inadvertent underpayments continue to emerge, the BCA said.
“The problem is the complexity of the workplace relations system. The government’s proposal does not address this fundamental issue of simplifying the awards,” it said.
“With the range of changes being proposed, along with the changes already passed last year, the system is getting more complex not simpler. That adds to rather than reduces the risks of unintentional compliance mistakes that harm both employees and their employers.”
If Australia is to make genuine inroads into reducing underpayments, BCA said the government must ensure there are incentives for employers to proactively identify payroll issues and move to correct them, back paying employees and revising systems and processes to ensure errors do not recur.
“The worst outcome would be fewer employers taking the initiative to proactively identify and rectify pay problems,” it said.
Genuine award reform is also needed in order to make awards easier to understand, apply and enforce, according to BCA.
“[This would reduce] the complexity, subjectivity, inconsistency, and ambiguity of how we regulate employment in Australia,” it said.
BCA also said the government also needs to create a system that actively encourages employers to find and fix problems, to ensure employees get what they are owed.
“We must create a safe haven or system of deferred prosecution to support employers to self report and rapidly back pay employees, with no fine or penalty imposed,” it said.
It has also called for the Fair Work Ombudsman to provide legally reliable advice clarifying the correct employment obligations, similar to the rulings the Australian Taxation Office provides.
“Any criminal offence should focus only on clear, deliberate, systematic, and significant underpayments. Any criminal penalties should apply only to modern award pay obligations and the National Employment Standards, not enterprise agreement rates and entitlements,” said BCA.
“Commonwealth compliance laws, including any criminal offence, must cover the total labour market – creating a national system to replace all state laws.”
About the author
