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May 3, 2023

The Big Steal: Part I

Underpayment of wages costs workers and the economy billions of dollars in Australia every year. Who is at fault? And what are the solutions?

Words: Fred Siggins
Illustrations: Tim Meakins

This is part one in a two-part series on wage theft and the complexity of the award wages system in Australia. Read part II here.

“What’s an ‘award wage’?” the bar manager asked me incredulously. This was at the end of a successful trial shift (unpaid, of course) at a busy bar in the Melbourne CBD about 12 years ago. I was being offered the job, and had enquired about pay rates.

“Y’know,” I responded, “The federal minimum wage for each industry?”

“Never heard of it,” he responded. 

“So no penalty rates for weekends or nights or anything?”

“Nope. We pay $15 an hour.”

“I’m afraid I can’t take less than $20,” I said.

He let out a single, joyless laugh. “Good luck with that, mate.”

At the time, EBAs (Enterprise Bargaining Agreements) were the norm in hospitality, allowing employers to offer a flat rate of pay over complex penalty rates from shift to shift and hour to hour. And while the “better off overall” test legally applied to all EBAs, most of us wouldn’t have known where to look to find our entitlements, and would have struggled to calculate them if we did. Like most hospo workers of my generation, I spent the better part of a decade on flat-rate wages and taking one 15-minute break during a 14-hour shift. I was one of the lucky ones. My hourly rate was better than most, I got all my super, and I leveraged my experience into management and corporate roles where award rates weren’t an issue. 

Ten years on, it would take a pandemic and a labour crisis for serious discussions of award wages and penalty rates in hospitality to get the attention they deserve. The last few years have seen a shift towards hospitality workers demanding fair pay and legal entitlements, and employers granting them. But even still, these government-mandated minimums seem like a victory and a luxury when in fact they are, by definition, the bare minimum. At the same time, recovering from repeated shutdowns and now facing rampant inflation, minimum wage rises and interest rate hikes, hospitality businesses are covering larger wage costs when there’s less financial wiggle-room than ever. 

The underpayment of wages, or ‘wage theft’ as it’s commonly referred to, is an understandably fraught topic and is a problem that the hospitality industry, with a disproportionately itinerant, young and vulnerable workforce, has yet to fully face. Unfortunately, among the gleeful takedowns of celebrity chefs and the woe-is-me complaints of business and industry groups about wage costs and complex award rates, rational and solutions-based approaches to the problem are difficult to come by. 

So how big of a problem is it, actually? What are the real harms on the personal, industry and society-wide levels? What solutions exist, and who is responsible for implementing them? Most importantly, how can employees protect themselves from exploitation and businesses avoid running afoul of the law?

Defining the problem

In Australia, up to 76% of young people have experienced wage theft.

"Systemic, sustained and shameful"

Before delving into potential solutions to wage underpayment and who should be responsible for implementing them, it’s important to understand the extent of the problem. Considering that wage underpayment is illegal, the statistical information available comes in the form of estimates rather than hard numbers, but all sources agree that we’re talking in the billions of dollars in underpayment of wages and other entitlements in Australia every year, and that the hospitality industry is one of the main culprits. 

According to a 2022 Australian senate inquiry into the unlawful underpayment of employees' remuneration, wage underpayment robs workers and the Australian economy of “billions of dollars every year.” Inclusive of superannuation and wages, the Australian Council of Trade Unions (ACTU) estimates that the cost to the Australian economy could be between $6 billion and $12 billion annually. A survey by The McKell Institute found that on average, 60% of respondents, and up to 76% of young people, had experienced wage theft.

In terms of superannuation, the Australian Taxation Office (ATO) estimates that in the 2018-19 financial year, a net gap between superannuation contributions that should have been paid and what was actually paid to be $3.5 billion. Industry Super's estimate for the same year was nearly $5 billion. The underpayment of super has a particularly insidious impact by reducing workers’ ability to retire comfortably, which exacerbates a whole ecosystem of social harm and eventually transfers the burden to expensive, taxpayer-funded support and crisis care later in life.

In 2020, PricewaterhouseCoopers estimated that around 13% of Australia's total workforce was affected by underpayment, with higher rates in certain industries such as the hospitality sector. This is in stark contrast to the UK, where less than 2% of the workforce was illegally underpaid in 2018 (less than 500,000 people out of a total workforce of around 30 million). In Australia, the Fair Work Ombudsman has found hospitality to be the sector with the highest rates of non-compliance, comprising 36% of all reports in 2020–21.

Women, the young, Aboriginal and Torres Strait Islander peoples, migrants and other vulnerable Australians are also at greater risk than the general population. According to the senate report quoted above, “vulnerable workers are at higher risk of exploitation due to a range of factors including gender, age, disability, ethnic or cultural background and language barriers” with hospitality cited as an industry that tends to employ a high percentage of vulnerable employees, especially migrants and the young. 

A survey by Unions NSW of 7,000 job ads posted in foreign languages last year found that 70% brazenly offered less than minimum legal pay rates, while a 2019 survey of more than 5,000 international students conducted by the Migrant Justice Institute reveals that 77% were paid below the minimum casual hourly wage, and 26% earned half or less-than-half the minimum casual hourly wage. Let that sink in.

From the business perspective, underpayment of wages is fundamentally unfair, giving the worst offenders higher profits while those that comply struggle to compete. Poorly-operated businesses stay afloat through exploitation when they should be closing to make room for better, more conscientious operators to take their place. Far from seeing the issue as an us-or-them struggle between workers and employers, venues who do right by their staff should see enforcement of minimum wages as a fight for their own survival. 

In short, the underpayment of wages in Australia is bad. It’s also widespread, particularly bad in hospo, costs the Australian economy billions each year, and incentivises good businesses to be bad while bad businesses thrive. 


"A continuing policy failure"

When there’s a crime wave, the obvious thing to look at is policing. In Australia, the Fair Work Ombudsman (FWO) is responsible for enforcing work rights, including the payment of correct wages and entitlements. I asked them why, and how, the problem got so big, and what’s being done to stop it.

“Each year, the FWO sets compliance and enforcement priorities that focus on industries that are at significant risk of non-compliance,” a Fair Work Ombudsman spokesperson said. “Our annual priorities provide a framework through which we prioritise how we allocate resources to undertake our proactive and responsive activities including investigations, audits and inspections of workplaces to ensure workers are getting the right pay and entitlements.”

Heartening for hospo workers, yet unsurprising given the extent of the problem, fast food outlets, restaurants and cafes are identified as a top enforcement priority for 2022–23. As an example, the FWO recently announced surprise inspections of food outlets in Perth to check that workers are getting the right pay and entitlements as part of their national Food Precincts program. 

In the 2021-22 financial year, the FWO filed a record 137 court actions and has been successful in securing significant penalties in matters it has brought before the court, according to their spokesperson. As one example, the FWO secured a $475,200 penalty in court against the operator of the 85 Degrees café brand in Australia for exploiting young Taiwanese students in Sydney under the guise of a purported internship arrangement.  But given that 85 Degrees is a publicly traded company with a market capitalisation of around $920 million USD (close to $1.4 billion AUD), it’s hard to see how an almost half-million dollar fine would be much of a deterrent. 

Journalist Ben Schneiders literally wrote the book on wage theft in Australia, and his work, Hard Labour: Wage Theft in the Age of Inequality, is a must read for anyone interested in the topic. Schneiders blames the massive levels of underpayment in Australia on historically low union membership. Unions, he says, once acted as an informal enforcer of wage standards, providing a forum for workers to report bad behaviour and backing them up in disputes with the power of numbers, funding and organisational structure. The Fair Work Ombudsman, which has only been around since 2009, simply hasn’t been able to fill the gap.

The unions themselves agree with Schneiders’ assessment. According to a submission by the Australian Council of Trade Unions (ACTU) to the Senate Economics Committee of the Australian Parliament Inquiry cited at the top of this article, “The environment in which wage theft has thrived is one where there has been a continuing policy failure to empower the social institution most capable of addressing the crisis – the union movement – to do so.” Furthermore, the report says, “The present system does not lend itself to resolving wage theft where it occurs and is detected. … the courts are expensive and inaccessible to ordinary workers and, there is no dedicated Commonwealth industrial court. The current penalties for wage theft are inadequate…” 

While union membership in Australia has dropped precipitously across the board in recent decades, hospitality has among the lowest rates of union membership of any industry. Back of house, there’s an ingrained culture of working crazy hours for minimal pay, while front of house are unlikely to have the sort of trade qualifications or longstanding relationship with a single employer which would expose them to union membership. 

Despite the current trend towards better pay and conditions spurred largely by the labour crisis brought on by the pandemic, the problem is still huge. And without some pretty major changes to enforcement and industrial relations, all it would take is a swing of economic conditions back in the direction of employers to reverse the trend and dump us all right back in the dirty dishwater of take-it-or-leave-it wages. 

Is complexity the problem?

"Australian Government Legalese"

Australia has a particularly complex system of minimum pay rates and entitlements compared to other industrialised nations, with large variances from industry to industry, and even within industries. Many business operators cite these difficulties as a barrier to compliance with workplace laws.

Pat is a restaurant operator and proprietor of a single venue that pays award wages and tends to retain quality staff for many years. “Pat” is not his real name. (He was reluctant to be identified publicly given the sensitivity of the issue.) I asked if he, as a small business operator, thinks the award is fair. “The burden isn't the wages,” he says. “I appreciate the intent of the award but the execution is prohibitively complex, especially on small businesses without HR or legal resources, not to mention annual updates, policy changes and the inevitable amendments when a new government is elected. I feel like some of the late night penalties are a bit unnecessary, too, because that work really fits some people's lifestyle. But as I get older, I guess I understand the need for it more.”

Pat also feels like the complexity of the award is the biggest barrier for workers to understand their rights. “I run through all options (casual, permanent part time, full time and individual flexibility agreement) with new staff to give them a choice, but also as a way of explaining to them how the award works. I've only met one staff member in my whole career who had actually read the award. I struggle to interpret the award, let alone an 18-year-old employee or someone whose first language might not be Australian Government Legalese.”

Tracy Addis-Hoskin is the Head of Talent & Culture for Speakeasy, a group of seven cocktail and spirits-focused venues in Sydney and Melbourne that has grown quickly since their first bar opening in 2010. Her job is a big one, taking care of around 180 often short-term employees in a fast growing business and rapidly changing labour and regulatory environment. 

Addis-Hoskin says that despite the difficulties of keeping up with pay-rates and regulations, simply, “It’s my job.” But the tone in her voice betrays the frustration with how businesses are treated by government bureaucracy. “Last year wage rates went up twice. One time we were given two weeks’ notice to change the rates of 180 employees.”

In Australia, the Fair Work Commission is responsible for setting award rates, and according to their own research into small business use of awards documentation, “there was very little confidence in the current modern awards. This lack of certainty was disempowering for small business owners.” And that, “information that is too hard to deal with may result in ‘best guess’ solutions or avoidance of the document altogether.” 

Government organisations are responding to the issue of overly complex workplace law in a number of ways. The Fair Work Ombudsman’s spokesperson says, “In October 2021, we refreshed our website following extensive user research and testing. Feedback from our stakeholders on the new website design has been resoundingly positive,” giving some hope that the information is getting easier to find and decipher. 

The Fair Work Commission has also undertaken work to address the concerning result of their research. Their spokesperson said that in response to the study mentioned above, The Hospitality Industry (General) Award underwent plain language redrafting in 2020. Surveys conducted on behalf of The Commission to assess the changes have had largely positive responses, although problems persist like a dizzying array of notes and links that can still make it hard to find answers quickly and clearly. 

As Ben Schneiders (the journalist and author) says, “Clearly there’s a benefit to making things as clear as possible. You should be able to read the Fair Work website and get a plain English idea of what you’re supposed to pay. But do I think the awards are so complex that large, sophisticated businesses can’t comply? Not at all. Everything is complex. Tax law is complex, but businesses still pay their taxes. No one can operate without having to navigate complexity.” 

Addis-Hoskin agrees. At the end of the day, she says, while the system could be easier for businesses to navigate, especially smaller ones, it’s their responsibility to get it right. “If you don’t have an HR person, a bookkeeper, someone who’s trained to do these things, just outsource it,” she urges. “You’ll get a better result and sleep better, too.”

Read part II here, where we explore solutions to the problem, and publish a list of resources to help workers and businesses navigate the award wages system in Australia.


Fred Siggins is a drinks writer based in Melbourne, Australia. He has worked in the hospitality and drinks industries for over twenty years as a bartender, educator and brand manager. As well as writing about spirits and Australian drinks culture, Fred hosts weekly tasting events at Melbourne whisky bar Whisky & Alement.

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