Wage theft costing workers $847m annually, study finds

Employers in the federal seats of Sydney and Melbourne the worst offenders for wage theft.

NSW accounted for nearly one-third of lost wages, or $306m across more than 500,000 workers.

Australian workers are being underpaid $847m annually, ripping more than $330m in economic activity out of the country, new analysis by progressive think tank the McKell Institute has found.

Examining Fair Work Ombudsman business audit campaigns back to 2009, the institute found an average of five wage victims per business who ended up being repaid $610 each.

NSW accounted for nearly one-third of lost wages, or $306m across more than 500,000 workers. Of the top 10 federal electorates for “wage theft”, the seat of Sydney had the highest average amount owed to workers – $25m owed 41,106 workers.

In the seat of Melbourne, an estimated 28,500 workers missed out on almost $17.5m, while North Sydney experienced $10m in underpayments across 16,500 workers.

“These horrifying figures are another blow for workers who are struggling to meet mortgage repayments, keep up with rising rents and pay their bills,” institute director Ed Cavanough said.

Ahead of the Albanese government introducing new wage theft legislation into federal parliament, Mr Cavanough said there was a degree of complexity in the award system that had contributed to genuine mistakes by small businesses.

But, while employer groups consistently blamed the supposed complexity of the award system for underpayments, he said there was an “ingrained negligence” that had contributed to the high rates of noncompliance.

According to the analysis, more than 40 per cent of the businesses audited fell foul of the Fair Work Act, while more than a quarter recorded breaches of monetary obligations such as award rates and agreements.

Across Australia, this equates to 269,728 businesses collectively ripping off more than 1.3 million workers, or roughly 11.5 per cent of the country’s workforce, a collective $847.25m annually.

Mr Cavanough said the estimates were at the lower end, because the analysis did not account for cases where workers were underpaid against appropriate award rates or the incorrect payment of penalty rates.

“The analysis puts a conservative figure on the cost of wage theft that is rampant across

Australia, equivalent to a 0.01 per cent loss in GDP,” he said.

The FWO generally found employer noncompliance was due to a lack of awareness and understanding of award provisions, rather than employers acting maliciously.

“The total amount of actual wage theft is likely much higher. This is an extraordinary amount of money being stolen and it’s unacceptable. Being unaware is not an excuse. The onus is on employers to understand their obligations to their employees,” Mr Cavanough said.

“It shows why we need strong laws to criminalise wage theft, like the protections being pursued through the federal government’s workplace reforms.”

The McKell Institute’s findings are based on International Monetary Fund analysis.