The Victorian Trades Hall Council, a Victoria union, is pushing for a 10 year jail term for businesses that willfully withhold the entitlements of their workers. This comes as Australia is rocked by scandals involving wage theft and superannuation underpayments by both small and large employers. Unpaid compulsory superannuation payments alone amount to as much as $5.6 billion withheld from 2.4 million Australian workers every year.
The sheer scope of the problem has made it clear that something needs to be done, and the ATO and ASBFEO have responded by introducing harsher fines, working to raise awareness among business owners, and cracking down on small businesses, who make up a significant portion of offenders.
Employees need serious protection from exploitation
There are many reasons that employers underpay wages or entitlements to their employees, ranging from simple ignorance to malicious exploitation. Businesses withholding superannuation underpayments might do so for years without their employees ever even realising that there was a problem. Further, violating employment contracts to withhold obligatory pay raises, illegally charging employees for work expenses, or treating employees as contractors allow businesses to take advantage of their workers because laws regarding these issues often aren’t well understood by employees. Worse, many employees feel that fighting their employers places their livelihoods at risk, and opt to do nothing.
Migrant workers are suffering disproportionately
While regular Australian workers already face significant difficulties in regard to these issues, foreign workers are under even greater pressure, particularly in the food industry. In one recent case, an Italian worker was denied proper documentation of her pay, and was forced to pay back a portion of her wages to create the illusion that she was being paid fairly on paper. While under contract to work for 40 hours per week, she was also actually required to work over 50 hours, with no compensation for the additional time worked.
Beside the risk of losing their jobs, migrant workers also face the additional threat of deportation. On top of that, they often face language barriers and knowledge gaps that make it more difficult to find and fully take advantage of the legal protections they technically have. It’s not difficult to make the argument that both preventive and punitive measures need to be in place to deal with and prevent these kinds of abuses. The problem is, of course, that many small businesses find themselves in violation of these laws purely by accident.
Harsher penalties risk harming SMEs
Increased fines and closer scrutiny by the ATO are already promising to make life harder for SMEs that haven’t been paying attention to recent developments. Introducing jail terms would send a very clear message that the Australian government won’t tolerate willful underpayment or wage theft, but it could also harm the economy.
As small businesses grow, they continually deal with new situations that they may not be adequately prepared for. That might mean hiring their first employees, bringing on contractors, or hiring internationally, which many business owner do without doing exhaustive research into their obligations. Without ever realising it, a business owner could easily go through all these steps and continue to operate for years while violating employment contracts and underpaying on superannuation obligations.
Significant fines today already place real stress on the finances of small businesses that tend to operate with very little excess capital sitting around to cover such costs. Additionally, many small businesses rely heavily on the labour of the business’ owner to survive. While larger businesses might be able to manage the cost and deal with a leadership vacuum, added jail time would almost certainly destroy any small business.
Because of this, any legislation needs to be carefully worded to severely limit the number of violators who are actually jailed. This is because broad enforcement risks destroying a massive number of businesses that are already known violators, leaving the very workers that the legislation is meant to protect out of a job.
What small businesses can do
The Australian government is aware of the scope of the problem, and is unlikely to resort to jail terms in any but the most egregious cases, if it were ever to implement such a penalty. However, the pressure being applied by rights groups and unions should come as a wake up call to business owners that there is a serious problem. The most important thing that business owners can do is work to maintain a positive and fair working relationship with their employees, and to ensure that they are meeting all their obligations as an employer. Not only does that protect your business directly, it helps to send a message to the government that business owners take their responsibilities seriously, and that punitive measures and additional regulation isn’t needed.