Australia’s vibrant cafe and restaurant scene hides a troubling reality: wage theft has become increasingly common in the hospitality sector. Recent cases, including the repeated penalties against Sinamon Cafe in Western Australia, highlight how widespread underpayment issues remain. With new laws criminalising intentional wage underpayment, both employees and employers need to understand common underpayment tactics.
This guide reveals the most frequent wage theft methods used in cafes and restaurants, helping workers identify potential violations and take appropriate action.
Common Wage Theft Tactics in Hospitality
1. Flat Rate Pay Below Minimum Entitlements
Many hospitality workers, particularly casual employees, are paid a flat hourly rate that falls below the minimum requirements of their relevant Award.
What to look for:
- Rates below the Restaurant Industry Award 2020 minimum
- No separate payment for overtime or penalty rates
- “All-inclusive” rates that don’t properly compensate for evening, weekend, or public holiday work
2. Unpaid Trial Shifts and Training
It’s common practice for cafes and restaurants to require unpaid trial shifts, but not all are legally compliant.
The rules:
- Short demonstrations of skills (1-2 hours) may be unpaid
- Productive work that benefits the business must be paid
- Any training that is required for the role must be compensated
3. Incorrect Classification
Employees are often classified at lower Award levels than their duties warrant, resulting in significant underpayment.
Common issues:
- Food and beverage attendants classified as Level 1 when performing Level 2 or 3 duties
- Supervisors paid standard attendant rates despite having responsibility for other staff
4. Unpaid Overtime and “Time in Lieu” Abuse
The hospitality industry’s unpredictable hours often lead to overtime violations.
Watch for:
- Pressure to work beyond scheduled hours without additional pay
- “Time in lieu” arrangements that don’t properly compensate for penalty rates
- Expectations to work through breaks or perform opening/closing duties off-the-clock
5. Cash-in-Hand Payments and Poor Record Keeping
Cash payments themselves aren’t illegal, but they often accompany poor record-keeping and underpayment.
Red flags:
- Incomplete or missing payslips
- Payments that don’t match hours worked
- No superannuation contributions
6. Sham Contracting
Some employers misclassify employees as independent contractors to avoid Award obligations.
Indicators:
- Treated as an employee (set hours, uniform requirements, supervised work)
- Paid without tax deductions
- No ABN or incorrect use of ABN
- How to Protect Yourself from Wage Theft
For Employees:
- Know Your Award
- Identify whether you’re covered by the Restaurant Industry Award 2020 or Hospitality Industry Award 2020
- Understand your correct classification and minimum pay rates
- Familiarise yourself with penalty rates and overtime provisions
- Keep Detailed Records
- Maintain a personal record of hours worked, including start/finish times and breaks
- Take photos of rostered shifts and any handwritten timesheets
- Save all payslips and employment contracts
- Verify Your Entitlements
- Use the Fair Work Ombudsman’s Pay Calculator
- Compare your payslips against Award requirements
- Check that superannuation is being paid
- Speak Up Safely
- Raise concerns with management in writing
- Contact the Fair Work Ombudsman for free advice
- Seek assistance from your union (such as United Workers Union)
For Employers:
- Implement Compliant Systems
- Use automated payroll systems like Workstem that incorporate Award interpretations
- Ensure proper classification of all staff
- Maintain accurate time and attendance records
- Conduct Regular Audits
- Review pay rates against current Award requirements
- Verify that penalty rates and overtime are correctly applied
- Ensure superannuation obligations are met
- Educate Management
- Train managers on Award requirements
- Establish clear policies for recording hours worked
- Create a culture of compliance from the top down
Recent Legal Changes: What You Need to Know
The Closing Loopholes legislation has significantly increased consequences for wage theft:
- Criminal penalties for intentional underpayment
- Increased fines for non-compliance
- Greater scrutiny of hospitality businesses
- Stronger protections for workers raising concerns
Building a Fair Hospitality Industry
Wage theft undermines Australia’s hospitality industry and exploits vulnerable workers. By understanding common underpayment tactics and knowing your rights, you can protect yourself from exploitation. For employers, implementing compliant systems and processes is not just legally required—it’s essential for building a sustainable business and maintaining reputation.
With solutions like Workstem’s automated payroll platform, hospitality businesses can ensure Award compliance while simplifying their operations. Together, we can work toward a fairer, more transparent hospitality industry where workers receive their rightful entitlements.
Take action today: Review your pay arrangements, educate yourself about your rights, and join the movement against wage theft in Australian hospitality.
How Workstem Prevents Unpaid Wages
Automated Compliance Solutions
Simplify award interpretation and payroll processing with Workstem, the all-in-one workforce management & payroll software designed for every industry.
Our payroll compliance system ensures:
- Award Interpretation: Automatic application of correct rates
- Real-time Calculations: Accurate overtime and penalty calculations
- Record Keeping: Digital audit trails for 7+ years
- Compliance Alerts: Proactive notification of potential underpayments
Employer Benefits
- 99.8% payroll accuracy rate
- Zero wage theft penalties for compliant clients
- 75% reduction in payroll processing time
- Automated Fair Work reporting
Choose from our Standard or Advanced plan to suit your business needs, and stay Fair Work compliant with confidence.
Underpayment Q&A: Your Top Questions Answered
Q1: What’s the difference between underpayment and wage theft?
A: Underpayment refers to any instance where employees receive less than their entitled wages, whether intentional or accidental. Wage theft specifically refers to deliberate, intentional underpayment of employees’ entitlements. Since 2024, intentional wage theft can result in criminal penalties including significant fines and even imprisonment in some states.
Q2: Can I claim unpaid wages if I was paid cash-in-hand?
A: Yes, cash payments don’t remove your entitlement to proper wages. You can still make a claim, though it may be more challenging without formal records. Evidence can include bank statements showing regular cash deposits, text messages discussing hours or pay, witness statements from coworkers, or your own detailed records of hours worked.
Q3: What if I signed a contract agreeing to lower rates than the award?
A: Any contract term that provides less than the minimum award or legal entitlements is void and unenforceable. Even if you signed such a contract, you’re still entitled to be paid according to the relevant award or agreement. Employers cannot contract out of their legal obligations.
Q4: How far back can I claim unpaid superannuation?
A: Unlike other wage claims, there’s generally no time limit for claiming unpaid superannuation. You can go back to when the super was first owed, though practical limitations may apply. The ATO can help recover unpaid super going back multiple years.
Q5: What happens if my employer disputes my hours or classification?
A: If your employer disputes your claims, the burden of proof often shifts to them to provide evidence. Employers are legally required to keep accurate time and wages records. If they cannot produce these records, Fair Work may accept your reasonable estimates of hours worked.
Q6: Can I claim for unpaid wages if I’m no longer employed there?
A: Yes, former employees have the same rights to claim unpaid wages as current employees. The process is identical, and time limits still apply (generally 6 years). Many wage claims are actually made by former employees.
Q7: What if I was classified as a contractor but believe I was actually an employee?
A: This is common. If you were really an employee misclassified as a contractor, you can claim all employee entitlements including minimum wages, leave, and superannuation. The Fair Work Ombudsman uses a multi-factor test to determine your true employment status.
Q8: Are there protections against being victimized for making a claim?
A: Yes, the Fair Work Act provides strong protections against adverse action (including dismissal, discrimination, or threats) for exercising workplace rights. If you experience victimization for making a wage claim, you may have additional legal claims against your employer.
Q9: What if my employer says they can’t afford to pay what they owe?
A: Financial difficulty doesn’t remove the legal obligation to pay owed wages. Options include: payment plans (get this in writing), Fair Work enforcement action, or if the company becomes insolvent, claiming through the Fair Work Entitlements Guarantee scheme.
Book a free demo with our payroll experts and experience how Workstem can streamline your payroll and workforce operations.
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