Can Bosses Be Penalised for Accidentally Underpaying Employees?

The number one topic that employers have trouble with, according to Employsure Australia, is their obligations relating to wages.

Modelling released in 2019 by consulting firm PwC estimated that up to 13% of Australian workers are affected by underpayments or wage theft each year, totalling approximately $1.35 billion.

Deliberate or Accidental

What is not clear is whether these underpayments are deliberate or accidental.

It may well be the case that some employers are falling short of their obligations because of difficulties comprehending Australia’s complex industrial relations laws.

It could also be the case that large companies with dedicated industrial relations and human resources staff are better equipped to comply with the laws.

Still, small and medium businesses without that support are struggling.

Australian Industrial Relations Law Reform

This figure has highlighted that Australian industrial relations law is likely in need of reform.

Since approximately June 2020, the federal government has led discussions between employers, industry groups, employee representatives and government representatives to tackle the issue of workplace relations reform, including discussion of underpayments and wage theft.

According to Employsure Australia, the Australian Council of Trade Unions has indicated that they will make a deal to not penalise bosses or employers who are ‘inadvertently’ underpaying employees.

As noted, ‘wage theft’ and underpayments are a pernicious issue in Australian employment law, but as a result of this concession, employers who discover an accidental underpayment and who act in good faith to correct the issue promptly and pay employees back may find that they can avoid penalties or other legal consequences.

The hope is that this may motivate some employers to ‘come forward’ and proactively take action to fix accidental underpayments, with the knowledge that they may not be penalised.

The full extent of the reforms is not currently known.

As things currently stand, the burden of proof lies on the employer to avoid mistakes or breaches of industrial relations laws.

It is therefore essential to be proactive if you think you may have underpaid a worker or are otherwise noncompliant with your obligations as an employer.

Obtaining quality legal advice and taking prompt action to address any breaches or underpayments may (likely) minimise any consequences before the problem becomes too big to deal with.

Contact Us

For more information about our blog or potential penalties for accidentally underpaying employees, contact us at Bambrick Legal today. We offer a free, no-obligation 15-min consultation for all enquiries.