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Businesses are underpaying workers $850 million a year and the FWO recovers less than two-thirds of the lost wages, a study by independent thinktank the McKell Institute has found.
The institute said FWO data showed that over a quarter of the 60,000 businesses audited since 2009 had breached their wage obligations under the Fair Work Act 2009.
Extrapolating this data, the institute estimated 269,728 businesses were robbing 1.38 million workers annually, or 11.5 per cent of the workforce.
CEO Ed Cavanough said actual wage theft could be as high as $1.35 billion since the data failed to capture the incorrect payment of penalty or award rates.
The economic flow-on effects of wage theft were also estimated at $330 million annually, using IMF multipliers.
NSW was responsible for nearly a third of total lost wages ($306 million across 500,000 workers), with Sydney-based businesses owing workers over $25 million, the highest amount recorded.
In Melbourne, over 28,500 workers missed out on nearly $17.5 million in wages.
“These horrifying figures are another blow for workers who are struggling to meet mortgage repayments, keep up with rising rents and pay their bills,” said Mr Cavanough.
In recent months, Best & Less, Woolworths, Bakers Delight, and Crown have all been subject to high-profile FWO action.
The McKell Institute said that wage theft was “culturally ingrained” across many industries and that businesses habitually exploited the FWO’s limited resources and funding.
Executive director Rebecca Thistleton said that for every case the Fair Work Commission successfully prosecuted, “we know there are far more instances that are never investigated and workers who are never properly compensated”.
“It shows why we need strong laws to criminalise wage theft,” said Mr Cavanough.
This year, the Department of Employment and Workplace Relations undertook public consultations on national sanctions criminalising non-payment and underpayment across all industries. Currently, Victoria and Queensland are the only states to have criminal sanctions for wage theft.
This story was originally published on HR Leader's sister brand, Accountants Daily.
