A recent report has uncovered millions of dollars’ worth of underpayments at public universities over the last three years. The research indicates that wage theft has become “an endemic part of universities’ business models”.

Employees at higher education institutions have been victims of “staggering” amounts of wage theft, according to a report by the National Tertiary Education Union (NTEU). The trade union has recovered millions of dollars in stolen wages and condemned the universities’ misconduct.

The NTEU’s research, published in February this year, was based on analysis of 34 cases across 22 institutions from 2020-2023. Its initial report revealed over $83 million in wage theft. Since then, results from ongoing cases have increased that number to more than $107 million.

The wage theft exposed in the report occurred in a variety of forms, including unpaid overtime, teaching misclassification and sham contracting to undercut Award and Agreement entitlements.

While the risk of wage theft is present in all industries, employees at higher education institutions are particularly vulnerable, says Susan Sadler CPHR, Founder and CEO of Red Wagon Solutions and AHRI’s South Australian State President.

“While any single point of failure in a system of payroll compliance can result in underpayment issues, there appears to be a perfect storm of factors within the university sector that combined to result in the severity of these underpayments.

“Governance and process failures such as poor and inconsistent practices of recording hours worked, incorrect payroll rules and not correctly applying the terms of the relevant enterprise agreement, are the core of how the underpayment issues came about.”

Clear links between wage theft and casualisation

In a statement following the report’s publication, NTEU National President Dr Alison Barnes blamed “rampant casualisation” for the wage theft crisis that has hit higher education, and said that more secure jobs would help curb underpayments.

Read HRM’s article about when you have a legal obligation to convert casual staff to permanent positions.

The NTEU reports that almost two thirds of university staff are working on casual or fixed-term agreements. It argues that only a minority of casual contract employment in universities is genuinely ‘casual’ in nature, since the work performed is usually needed on an ongoing basis.

According to its findings, universities can often underestimate the time it will take casual staff to complete tasks such as marking or lesson preparation, and employees on fixed-term contracts might be reluctant to speak up knowing that their employment is not secure.

To combat this concerning trend, the NTEU has urged institutions to create more effective casual conversion provisions to minimise insecure work.

Criminalisation of wage theft

Victorian universities copped the biggest bill for underpayments, owing a total of over $50 million to employees in unpaid wages. Institutions in New South Wales, which came in second, owed less than half this sum (just under $25 million).

This is noteworthy given that Victoria is one of only two Australian states – along with Queensland – that has criminalised wage theft. In fact, in late 2022, a Melbourne restaurant became the first Australian employer to face criminal charges for underpaying its staff.

The extent of the wage theft revealed in the NTEU’s report has prompted many to question when Australia can expect to see criminal wage theft laws rolled out nationally. The Labor government took the introduction of wage theft laws into the previous federal election, but nationwide legislation to criminalise the practice has yet to be enacted.

Experts suggest this is because a complex matter like wage theft needs more time and resources than could be dedicated by the Secure Jobs Bill, which only deals with civil matters.

In the closing section of its report, the NTEU calls on the government to ensure that the next tranche of IR reform includes “strong criminal penalties” for organisations engaging in wage theft, including jail for the worst offenders.

The union also recommended holding inquiries to find out how the underpayments in these cases occurred and how governance structures could be reformed to stamp out wage theft.

While most of the universities analysed will likely not face criminal charges, Sadler stresses that the underpayments will not go unpunished.

“All organisations are at risk of underpayment issues, not just the big and seemingly complex ones.” – Susan Sadler CPHR, Founder and CEO of Red Wagon Solutions and AHRI’s South Australian State President

“The consequences will depend on the actual contraventions, whether the university self-reported the non-compliance, and their level of cooperation with the FWO in discussions about, and commitment to, remediation,” she says. “As a minimum, there would be a requirement to provide back pay for the known underpayment, including interest on wages and superannuation.

“In addition to the financial consequences, the reputational damage could be significant. Not only will these issues. and the way in which each university has responded to them, affect the trust of their existing and future employees, but it could impact their ability to attract [future] students, research and funding opportunities.”

How to eliminate the risk of underpayment 

While the NTEU has called on universities to convert casual staff where possible, it has also acknowledged the complexity of universities’ business models and the need for some degree of casual employment. It offers the example of expert lecturers who may present a limited series of lectures based on their active professional practice. 

Particularly in sectors such as education, hospitality and retail, the necessity of employing staff on a variety of contract types presents employers with potential challenges when it comes to ensuring staff are being paid correctly. Even employers with the best of intentions are at risk of non-compliance if they are not keeping a close eye on the legal frameworks governing their salary arrangements. 

In order to maintain compliance, Sadler offers three tips for employers to conduct proactive payroll compliance:

1. Commission regular audits into your payroll.
2. Invest in contemporary payroll and time/attendance systems to ensure accurate and robust record keeping.
3. Check your rules. Misclassification of employees is a very common occurrence that leads to underpayments, as is the incorrect application of rules to particular circumstances. Payroll will be processed in accordance with its programming, i.e, the rules that are entered into it. Get one wrong, and you have an ongoing non-compliance loop. 

“All organisations are at risk of underpayment issues, not just the big and seemingly complex ones,” she says.

“In my experience, good governance practices and culture go a long way to preventing [underpayments], while enabling the organisation to respond well and remediate quickly if there is an issue.”

Concerned about your legal and Fair Work compliance? AHRI’s short course will give you an understanding of the key elements of legislation, regulation and practices HR needs to be across.