With recent high-profile incidences of wage theft in the media, it is timely that the Attorney-General is looking at this issue. In today’s analysis, Kathy MacDermott of the National Foundation for Australian Women (@NFAWomen)) explains why wage theft is a gendered issue in Australia, highlights areas of concern from the discussion paper, and puts forward recommendations that would provide the necessary holistic response. The full submission is also available.

The Attorney-General’s Department has issued a discussion paper on penalties for wage theft. The National Foundation for Australian Women has made a submission in response, arguing that the government’s discussion paper significantly underestimates the extent of the problem and the scope of the response that is required.

What behaviour is covered by the term ‘wage theft’?

Wage theft is shorthand for employer practices which include:

Women’s work? Wage theft is endemic in female-dominated industries, and the Attorney-General must consider such practices as endemic and structural. Photo by Louis Hansel on Unsplash.

paying a base hourly rate that is below the relevant award or minimum wage base rate
ignoring obligations to pay penalty rates for hours worked in the evenings, on weekends or on public holidays;
failing to comply with obligations to pay overtime rates or other incentive-based payments, bonuses or loadings;
failing to provide or pay out leave entitlements or failing to pay superannuation entitlements;
‘cash back schemes’ whereby workers receive bank transfers of correct legal wages and are then forced to give back a proportion of their pay to the employer in cash; and
‘off-the-clock violations’ where staff are required to work beyond their scheduled or clocked-off finishing time, or to complete training relating to their employment without pay.

While widespread, wage theft is not gender neutral. The behaviour involved most commonly and most significantly affects low paid employees in part-time and casual work — all groups in which women predominate. It is also commonplace in highly feminised industries such as hospitality and retail (Ibid.). While it disproportionately affects migrant workers, among migrant workers it disproportionately affects women.

Where the discussion paper gets it wrong

While it is commendable that wage theft is receiving attention, our analysis indicates that the Attorney-General has mis-represented the endemic nature of wage theft, which will lead to ineffective responses.

The ‘bad apple’ view that wage theft is confined to ‘a small number of employers’ misrepresents available data

The Attorney-General’s discussion paper presents a partial picture of the extent of the problem of wage theft. It recurs to the ‘bad apple’ view of non-compliance among ‘a small number of employers’, which treats wage theft as aberrant and non-systemic. This view ignores available research: as the data below indicates, wage theft is endemic to the point of contributing to the national problem of chronic low wage growth.

More commonly recognised data provided to government includes:

In 2015-16 the average rate of industry compliance with labour laws was found by the Fair Work Ombudsman (FWO) to be only 61%.
An audit campaign of the hospitality industry conducted by the FWO found that 46% of restaurants, cafes and catering businesses; 47% of takeaway food businesses; and 20% of accommodation, taverns and bar businesses were responsible for wage or monetary contraventions (see FWO, 2015, p. 6; FWO, 2016, p. 7; FWO 2013, p. 11).
A 2015 audit of fast food sites found that 84% of fast food stores were responsible for some type of underpayment; 39% were paying incorrect base rates of pay; and 44% were not paying penalty rates or loadings.
A 2017 study that surveyed 4,322 temporary migrants in Australia from 107 countries found that almost a third (30%) earned A$12 per hour or less. Almost half (46%) of participants earned A$15 per hour or less (excluding 457 visa holders) – at a time when the legal hourly adult minimum wage was $17.70. This wage theft was evident across many industries, but was especially prevalent in food services, and particularly extreme in fruit and vegetable picking.
In 2018 FWO data indicated that around 1 in 5 Queensland workers were suffering some form of wage theft regularly, with the total economic impact exceeding $1.2 billion in that state.
In 2019 FWO data indicated that up to 20.2 per cent of workers in South Australia were subject to wage theft, in all likelihood costing that state's workers more than half a billion dollars per annum.
Unpaid superannuation robs employees and increases the burden on government to fund the Age Pension. Industry Super Australia (ISA) research shows that the problem has increased by 25 per cent in 3 years since 2013-2014 with 2.85 million Australians short changed $5.9 billion in super entitlements in 2016-2017.
Other areas where widespread wage theft has been documented include the horticulture, cleaning, meat processing and security industries, and most recently the recycling industry (See for example Berg and Farbenblum 2017, p. 99; Schneiders, 2019).

Leaving unemployment: Have a go to get stuffed

The growth in wage theft is concentrated in the nexus that links insecure employment, precarious hours, low wages, and movement into and out of unemployment or workforce participation.

Take the case of those moving into work after having been unemployed or out of the workforce for for 12-24 months. Sixty-two per cent of the jobs obtained by this group in 2016-17 were part-time and 38% were casual. The part-time and casual jobs were not mutually exclusive, making it possible that nearly all of the jobs obtained were casual. If minimum protections put in place by the award safety net were functional, this group should have been receiving a 25% casual loading[1] to partly[2] compensate for loss of permanent terms and conditions. In fact, a recent study from Wooden and Lass, drawing on data from the Household Income and Labour Dynamics in Australia (HILDA) survey, has found that during that period:

Almost a third of casual workers in Australia were earning less than the legally prescribed minimum wage. These are people who should in fact have been receiving a 25% casual loading in addition to the minimum wage. Even allowing for measurement error, the number could still be as high as 350,000 people.
Among the lowest earning 10% of part-time workers, women were receiving only $15 an hour in a year in which the legal minimum wage was $18.30.

A narrow view of problem rationalises a narrow view of fixing it

The ‘bad apple’ view is used in the discussion paper to underwrite a narrow set of options which are non-systemic and which offer no effective strategic response to the growing erosion of national employment standards.

The proposals in the discussion paper are penalty focussed. Penalties alone are unlikely to have an impact on the problem in the absence of increased and coordinated detection, enforcement and prosecution measures.

The Fair Work Ombudsman’s (FWO) research into its own practice shows that almost 40% of businesses caught breaking workplace laws, including underpaying employees, were still doing it when they were re-audited. Without increased detection activity, coordinated with meaningful enforcement and prosecution measures, penalties alone will neither identify more non-compliant businesses nor increase compliance.

For this reason NFAW’s analysis and recommendations go beyond the proposals in the discussion paper. We recommend that in addition to reviewing penalties, the government address the need to improve mechanisms for detecting wage theft, for bringing cases, for recovering unpaid entitlements and enforcing penalties, and that it should resource a complementary education campaign for workers and employers.

Specific recommendations – some of them drawing on measures developed by the Victorian government for its jurisdiction -- include:

new laws to make it faster, cheaper and easier for workers to get the money they are owed by their employer through the courts. Claims of up to $50,000 would be heard before a special small claims tribunal where filing fees would be lowered, claims heard within 30 days and court processes simplified;
the introduction of an automatic enforcement model putting the onus on the employer to demonstrate they have complied with court orders and paid the entitlements owed to workers;
criminalisation of long term and systemic wage theft, with the threshold for criminal conviction set at a level to operate as a practical deterrent and triggering a reverse onus of proof for re-offending businesses;
automatic disqualification of those receiving a criminal conviction for wage theft from managing corporations for five years;
enabling temporary migrant workers who are victims of sham contracting practices to have access to the Fair Entitlement Guarantee, which protects the entitlements of employees of companies which go bankrupt; and
a Parliamentary review of the impact of government measures after three years based on independently set benchmark and research data.

Read the NFAW submission in full.

[1] ‘The long-established method of calculating the casual hourly rate for a particular classification is to add the 25% casual loading to the ordinary hourly rate for weekly hire employees.’ Fair Work Commission, 4 yearly review of modern awards - Casual employment and Part-time employment, [2017] FWCFB 3541, https://www.fwc.gov.au/documents/documents/summaries/2017fwcfb3541-summary.pdf para 54.

[2] The Fair Work Commission (FWC) accepts that the casual loading meant to compensate for the lack of annual and sick leave ‘does not take into account the detriments…includ[ing] attending work while sick, not taking recreational leave because of concerns about whether any absence from work will endanger future employment, the incapacity to properly balance work and attending to personal and caring responsibilities and commitments, changes in working hours without notice, … potential for the sudden loss of what had been regular work without any proper notice or adjustment payment … the lack of a career path, diminished access to training and workplace participation, poorer health and safety outcomes and the inability to obtain loans’ (op cit, para 7).

This post is part of the Women's Policy Action Tank initiative to analyse government policy using a gendered lens. View our other policy analysis pieces here and follow us on Twitter @PolicyforWomen

Wage Theft, or “Have a go to… get stuffed”