The prestigious National Gallery of Victoria has been rocked by a wage scandal with allegations emerging that security guards are being forced to work for cash.

Key points: An auditing firm has been brought in to investigate the claims of underpayment

An auditing firm has been brought in to investigate the claims of underpayment Workers say they were fired or threatened with the sack for raising pay concerns

Workers say they were fired or threatened with the sack for raising pay concerns The NGV says its security contractor was sourced through government channels

One guard has told the ABC that he and many of his colleagues were illegally paid cash in hand, while others worked on weekends for a flat hourly rate below the award wage.

The Victorian Government has appointed auditing firm KPMG to investigate, and may refer the allegations to the FairWork Ombudsman.

Steve (not his real name) came to Australia as a refugee, and was happy to find his first job as a security guard at the gallery two years ago.

He was hired by the gallery's security contractor Building Risks International Pty Limited (BRI Security), but said after about two months he was transferred to a sub-contractor called Java Security.

"They said you have to work cash in hand," he said.

"If you don't want to do it, you have to leave."

Steve said from then on he was paid between $17 to $20 an hour flat rate with no tax and no entitlements such as sick leave.

"It's [the] wrong thing. We need to work legal but the problem is they make something like job mafia. When you go, they push you to work cash. It's like abuse," he said.

Steve said during his employment the majority of security guards working at the NGV were paid cash in hand.

Steve left the job in December 2016, saying he had had enough of the conditions.

"When we came to country like Australia, we are looking for fair. But it's not fair. We are working hard, and other people are making millions of dollars off us," he said.

Java Security has told the ABC it categorically denies paying security guards in cash.

BRI Security also denies the allegation.

Working at NGV 'like an illegal sweatshop'

Sorry, this video has expired 'Like an illegal sweatshop'

Licensed security guard Belinda Panaou told the ABC she was hired by BRI in June 2016.

"It was $22.50 [per hour] a flat rate, every day, seven days a week. It didn't matter if I worked Saturday or Sunday," the 39-year-old said.

The award minimum for a Level 1 security guard is $19.89 an hour, $29.84 an hour on Saturday and $39.78 an hour for Sunday work.

But BRI operates under a Work Choices-era agreement, allowing them to pay their guards less than the award on weekends.

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Ms Panaou said that after being hired by BRI, her employment was transferred to a sub-contractor called National Security Group (NSG) Australia.

She said she was shocked to learn other guards were being paid cash in hand, and said those guards were favoured for more shifts.

Ms Panaou says she was fired after raising concerns about pay and conditions. ( ABC News: Margaret Burin )

The single mother said she was fired by BRI after raising concerns about pay and conditions to an NGV staff member.

"I was quite proud to wear the uniform at first and walk in there, until I started seeing what was going on," Ms Panaou said.

"I can't even walk into the NGV anymore … it's lost its reputation for me and I consider it now to be like an illegal sweatshop."

The Victorian Department of Treasury and Finance appointed auditing firm KPMG to investigate the claims.

"The department takes all such matters very seriously — an independent investigator was engaged as soon as these allegations were raised," a departmental spokesman said in a statement.

"We received the investigator's final report this week … further action will be taken as appropriate, which includes referring the allegations to the Fair Work Ombudsman."

The National Gallery of Victoria declined to be interviewed but said in a statement BRI Security "was engaged through a Victorian Government State Purchase Contract with a vetted Department of Treasury and Finance (DTF) approved supplier".

The department declined to answer whether such a contract allows for sub-contracting to external companies.

Security sector rife with sub-contractors

BRI Security holds contracts to guard many well known institutions including the Art Gallery of Western Australia, Australian Council of the Arts, Public Record Office of Victoria, La Trobe University and the University of Western Sydney.

BRI declined to answer the ABC's questions regarding its sub-contracting arrangements at the National Gallery of Victoria.

The company said in a statement that its employees are "presently paid under a lawfully registered enterprise agreement in Victoria and all our employees are paid in accordance with that agreement".

"The allegation BRI pays its staff off the books is false. BRI does not pay its employees cash," the statement said.

NSG Australia did not respond to the ABC's inquiries.

Java Security declined to answer questions.

United Voice, the union representing security guards, said the Victorian Government should terminate BRI Security's contract at the NGV.

"Clearly there needs to be much stronger standards in the way the State Government awards its contracts," Victorian secretary Jess Walsh said.

The union said sub-contracting within the security industry was at "epidemic" proportions.

"We see this happening almost everywhere in the security industry at the moment," Ms Walsh said.

A survey of United Voice members last year found 56 per cent of members worked along side a sub-contractor on a daily basis.