The Fair Work Ombudsman conducted more than 4,000 investigations based on tip-offs in 2021, an increase of 77% from 2020. The probes recovered $28.7 million in underpayments.

Fair Work also audited almost 700 businesses in that time, finding 81% were non-compliant with Australia’s industrial relations framework, and ordered another $5 million in back-payments.

The most common issues are incorrect calculations for hourly rates, penalty rates, and annual leave.

The statistics are revealed in the Fair Work Ombudsman’s 2020-21 Annual Report.

The document also lays out the Ombudsman’s strategy for choosing which businesses it will focus on in the coming year.

It aims to stamp out blatant breaches of the law, as well as look closely into industries with high levels of non-compliance.

Businesses with poor systems and weak record keeping will also be put under the microscope.

Targeting Fast Food, Restaurants and Cafes

In the report, Fair Work identifies fast food, restaurants and cafes as a top priority for more investigations, because of the industry’s “disproportionately high levels of non-compliance and vulnerable workforce”.

Contravening the Fair Work Act is a serious matter and can involve severe penalties.

For underpayment of wages, Fair Work has launched a number of compliance strategies that are likely to continue this financial year.

The Commission has begun “surprise audits” of specific geographic food districts. In 2020-21, these included 50 businesses in Gold Coast’s Southport & Mermaid Beach food districts, and 56 in Adelaide’s Chinatown precinct.

Typically, Fair Work collects intelligence about areas where it believes businesses are likely to be breaking the law before deciding where to conduct the audits.

This is based off a combination of data and tip-offs from the public. Surprise audits will continue in 2022.

Large Scale Corporate Underpayments

One of the Ombudsman’s other key priorities continues to be large scale corporate underpayment of wages.

In recent years, many companies have self-reported underpayment of wages and moved to address the issue.

In 2020-21, Fair Work finalised investigations into 49 self-reported matters, resulting in back-payments of over $100 million to almost 55,000 employees.

Many businesses are also signing up to “enforceable undertakings”, which require them to pay back the money as soon as possible or face the courts. 

Enforceable undertakings usually also require businesses to independently audit their payroll, which is a very costly way to ensure compliance.

Staying Within The Rules

While the overall non-compliance rate was 81% for audits, the rate for most ordinary businesses will be far lower.

The Fair Work Ombudsman deliberately audits businesses it thinks are breaking the law.

The reality is that the Ombudsman doesn’t want to target businesses doing the right thing. Its priority focus is on businesses that blatantly disregard the law, or significantly impact workers.

The Ombudsman also aims to educate workers and businesses, rather than sanction them.

The most common rule breaches were:

  • Hourly rate underpayments
  • Wrong penalty rates for weekend work
  • Incorrect annual leave

Across large scale corporate, medium and small business, the Fair Work Ombudsman believes the underpayment of wages problems have similar causes:

  • Using manual processes for recording hours worked, or not keeping records at all
  • Failing to apply an enterprise agreement to the correct employees
  • Paying salaries that are less than the payments that should be made to an employee (e.g. overtime, shift penalty rates, etc).
  • No system for checking payroll compliance

Fixing these issues is the easiest way to avoid action from Fair Work.

Of course, there are almost certainly other more complicated issues that Fair Work could dig into, but audits tend to focus around basic compliance problems.

The biggest reason for this is that Fair Work Officers are given performance targets to hand out 850 infringement notices each year as part of their Corporate Plan.

Because of this, they tend to focus on issues that are easy to find – like missing records, or using the wrong award.

It works in the same way as a speed camera being placed where it will collect the most fines.

What if I’m Targeted?

Fair Work investigates thousands of businesses every year, and you shouldn’t panic if you’re audited.

It’s important you are cooperative and comply with the Ombudsman’s request for information.

Fair Work has the power to issue notices which can compel you to give information, produce documents, or appear before the Ombudsman to answer questions.

Failing to comply with these notices will result in court-ordered penalties against you.