Bosses who underpay workers shouldn’t go to jail or face criminal penalties, a leading employer group says.

Australian Industry Group has released its submission to the federal government’s industrial relations discussion paper into tougher penalties for employee exploitation.

While a string of underpayment scandals have emboldened unions’ push for dodgy bosses to be slapped with criminal charges, the submission warns against calling them “wage theft”.

“Ai Group strongly opposes the introduction of criminal penalties for wage underpayments,” the submission says.

“While at first glance, the introduction of criminal penalties for underpayments might seem like a good idea, there are many reasons why this is not in anyone’s interests and needs to be rejected.”

The employer group says criminal penalties will discourage investment, entrepreneurship and employment growth.

Exposing directors and managers of businesses to criminal penalties would operate as a major barrier to employers self-disclosing underpayments to the Fair Work Ombudsman, it said.

“Importantly, a criminal case would not deliver any back-pay to an underpaid worker,” Ai Group argues, warning underpaid workers could wait years for civil actions on hold while criminal cases are under way.

The hospitality and retail sectors have been ensnared in controversy in recent years, with Labor and unions hitting out at “wage theft”.

“This is an inappropriate, misleading and overly emotive term which is leading to some employers being branded as thieves as a result of underpayments which were the result of genuine payroll errors,” Ai Group says.

The Morrison government’s discussion paper has raised the introduction of criminal offences, including jail terms and massive fines.

Ai Group warns against lowering the bar to recklessness from actual knowledge when prosecuting payment issues because of complexities in the industrial relations system

“It is very challenging for large businesses and (human resources) professionals to successfully navigate the workplace relations system, and even more challenging for (small and medium-sized enterprises).”

The Fair Work Ombudsman agreed to “contrition payments” in recent high-profile cases involving George Calombaris, Sunglass Hut and Thales, with the penalties vastly less than the millions paid back to workers.

Ombudsman Sandra Parker conceded last week the public believed the penalties in the Calombaris case should have been tougher.

-AAP