02 Risk

A symptom of the pandemic or an ongoing culture issue?

While the full impact of the pandemic on wages remains to be seen, we know that underpayments will continue to be an issue this year. In the face of stand-downs, redundancies, lockdowns and closed borders contracting the labour market, the Fair Work Ombudsman (FWO) recovered $148 million for underpaid workers in 2020-21 (69,735 employees). The issue was particularly acute in sectors such as agriculture, fast food, retail, and other industries with a historically high proportion of overseas workers. The amount recovered in 2020- 21 is 20% more than what was recovered in 2019-20 and does not factor in underpayments made by employers who elected not to self-report. Shockingly, it is also five times more than what was recovered in 2017-18.

The principle is quite simple: pay people what they are owed. However, in practice, many businesses cite complex industrial relations, issues with their payroll and workplace systems, as well as a lack of expertise capable of ensuring employees are being paid what they are entitled to. Most companies, upon discovering they have underpaid their employees, will do everything possible to right this wrong.

One cannot help being reminded however, that if large corporates such as NAB, Woolworths, Coles and CBA are currently undertaking large-scale remediation, it is almost impossible to gauge the extent of the issue on businesses lower down the food chain. For context, the FWO commenced 76 new litigation matters in 2020-21, an increase of 40% from 2019-2020.

The FWO’s vigilance and robust approach is fundamental to protecting the integrity of the labour market, where an employee receiving their lawful earnings is a right not a privilege.

As the economy and the labour market reawakens, the government must pave the way for local and international workers eager to secure a brighter future post pandemic. It will be interesting to see whether the “new COVID normal” creates fertile ground for further underpayments and an underground labour market, or whether the FWO’s already demonstrable show of force will be enough of a deterrent.