Employers who underpay workers are set to face close scrutiny, with the Federal government launching an official wage theft inquiry.

The wage theft inquiry comes after corporate regulators and watchdogs identified systematic failings from small and large businesses alike. Over the last 12 months, local operators and franchisees have come under fire for underpayment, however it was an explosive announcement last month that prompted action.

Major corporation Woolworths revealed an error in the business’ complex enterprise agreement had resulted in over $300m of employee underpayment.

Woolworths was quick to minimise the situation, labelling it as an error of “simple maths”; which has fast-become a familiar tagline for companies under fire.

Many business found guilty of wage theft put the blame on the modern award, suggesting awards, and the government laws governing them are difficult to parse, however, some industry analysts are not convinced.

“It is concerning that payroll managers – those who are involved in handling our pay, superannuation and leave entitlements – find the laws governing these things confusing and at times contradictory,” said Tracy Angwin, CEO of the Australian Payroll Association.

While small business owners caught up in underpayment may truthfully be a victim of agreement complexity, Anthony Forsyth, professor of workplace law at RMIT University believes the excuse wears thin for major corporations.

The workplace law expert suggested that if that a company like Woolworths was able to navigate the complex intricacies of procurement, distribution and storage, it should be well equipped to traverse the complexities of its own employee agreements.

“If Woolworths can do that, it’s hard to believe, with all the lawyers, accountants and professional advisers at its disposal, it couldn’t ensure it complied with industrial relations laws,” he said.

Labour senators on Wednesday agreed, referring wage and superannuation underpayments across all industries to the upper house’s economics committee.

Wage theft inquiry

The newly announced wage theft inquiry will look at the extent and effects of unlawful underpayment of workers and what can be done to tackle the issue.

In October, Fair Work Ombudsman Sandra Parker said businesses that engage in wage theft should be held accountable, and could see litigation where appropriate.

“Each week, another large company is publicly admitting that they failed to ensure staff are receiving their lawful entitlements. This simply is not good enough,” Parker said.

“Companies and their boards are on notice that we will consider the full range of enforcement options available under the Fair Work Act.”

The wage theft inquiry begins public hearings this week, however not all industry bodies are comfortable with the proceedings.

Shane Rodgers, Australia Industry Group Queensland head said the definition of wage theft as “when an employer fails to provide their employees with the full wage or salary to which they are entitled” could be misconstrued.

“The characterisation of such behaviour in terms of ‘theft’ is misleading, inappropriate and has the potential to unfairly brand every failure to correctly calculate an employee’s pay as criminal,” Rodgers said.

“This is taking us to very dangerous ground. The vast majority of employers devote considerable resources to navigating the often-complex remuneration maze to ensure their people are paid correctly.”

Rodgers suggested that instilling harsher penalties may make for a less stable economic environment, particularly for small business owners and franchisees.

“The idea that someone misinterpreting a requirement or making a mathematical miscalculation could be criminally culpable is a sobering proposition for Queensland companies, particularly small businesses with limited payroll resources,” he said.

“The notion of holding an inquiry into a loaded buzz-term like ‘wage theft’ is also the wrong approach to a complex issue and a highly inappropriate starting point for a balanced community discussion on wage compliance.”

The parliamentary committee is expected to hand down a report in June next year.

Additional reporting: AAP and Inside Retail