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Law

Pay exploitation targeted with new legislation

By Jack Campbell | |6 minute read

Legislation was recently introduced to Parliament that aims to boost the security of many workers by reducing pay exploitation.

The Fair Work Legislation Amendment (Closing Loopholes) Bill 2023 was brought before Parliament on 4 September, aiming to close loopholes that affect wages and work conditions.

It is reported that some employers are guilty of underpaying labour hire workers, with loopholes in legislation making this possible. These new laws will ensure that these workers will be entitled to the same wages as those working under a company’s enterprise agreement.

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These amendments will affect around 67,000 workers, and the government said the economic impact will be unrecognisable.

“These changes will affect a small number of workers. But for the workers this affects, closing this loophole will be life-changing,” said Employment and Workplace Relations Minister Tony Burke.

“The Liberals and Nationals refused to close the labour hire loophole when they were in government – and they still refuse to even acknowledge there’s a problem. They call it a ‘made-up issue’. It’s not a ‘made-up issue’ for the workers getting ripped off.”

Another major introduction of the legislation is making it a criminal offence to deliberately underpay workers. Offences could land employers with a $7.8 million fine and 10 years in prison.

Not all are happy with the proposal. Stephen Roebuck, associate director of advice and consultancy at Employsure, has concerns that employers could accidentally run into compliance issues.

“This proposed bill aims to reduce the instances of intentional underpayments; however, [it] could also strike fear into employers who want to do the right thing but think that they may face criminal repercussions,” he explained.

“While there are cases of wage underpayments, the majority of these cases are due to complex penalty, overtime, allowance, or loading conditions being overlooked or incorrectly calculated. The modern award system can be challenging for small businesses to navigate, particularly when their business falls under multiple awards, each with a myriad of clauses.”

What businesses will need to ensure is that the proper care is given to payroll. With this increased pressure, mistakes may be made, but it will encourage more focus on compliance for organisations.

“The government has indicated that they will develop a ‘Voluntary Small Business Wage Compliance Code’, with the intention of preventing the punishment of employers who accidentally underpay wages under the new laws,” said Mr Roebuck.

However, some are concerned that the vagueness of these laws could land companies in trouble: “Without further details, we don’t really know if this will go far enough. It is concerning that this seems to have been an afterthought, announced only one day before the legislation was introduced to Parliament,” Mr Roebuck outlined.

While some are voicing concerns, Mr Burke is surprised by the backlash. However, he has assured the public that the goal of these laws is to protect workers, not land people in jail.

“If you intentionally, as a worker, take money from the till, it’s a criminal offence and it should be. But if the employer intentionally withholds money from your pay, it’s not a criminal offence. Now, that is a simple loophole that should be logically simple to close. I’m surprised it has even been controversial,” Mr Burke said.

“The objective here is not to send people to jail. The objective is to make sure that people are paid properly.”

If the legislation passes, businesses will have until November 2024 to prepare for the new compliance.

RELATED TERMS

Compliance

Compliance often refers to a company's and its workers' adherence to corporate rules, laws, and codes of conduct.

Industrial relations

Industrial relations is the management and evaluation of the interactions between employers, workers, and representative organisations like unions.

Jack Campbell

Jack Campbell

Jack is the editor at HR Leader.