Starting 1 January 2025, amendments to the Fair Work Act 2009 (FW Act) have introduced criminal penalties for wage theft, marking a pivotal change in Australian employment law. These new rules emphasize the need for strict adherence to wage obligations, offering protection for both workers and employers. We consulted James True, Employment Practice Leader at LegalVision, to gain expert insights into what this means for small businesses. Below is an overview of the legislation and how the new Voluntary Small Business Wage Compliance Code can serve as a vital compliance tool.
Understanding Wage Theft
Under the revised legislation, an employer commits wage theft by deliberately failing to pay the correct wages under a modern award, enterprise agreement, or an order under the FW Act. Intentional underpayments now carry criminal penalties, including the possibility of prosecution. While unintentional errors are not criminal, they can still result in significant civil penalties and damage to a company’s reputation.
This legal shift follows increased scrutiny around wage compliance, as regulators push to ensure workers are paid correctly, including minimum wages, penalty rates, allowances, and overtime.
The Role of the Voluntary Small Business Wage Compliance Code
To help businesses—particularly those with fewer than 15 employees—navigate these complexities, the Fair Work Ombudsman (FWO) has rolled out a voluntary compliance code. This Code offers practical steps for wage compliance and provides a degree of legal protection. Notably, if a small business follows the Code while addressing a non-payment issue, the FWO is barred from initiating criminal proceedings.
For a detailed guide, visit the FWO’s official resources.
Minimising the Risk of Legal Action
Before discovering an underpayment:
Employers can shield themselves from liability by actively working to pay their staff correctly. Steps include:
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Refer to official sources: Consult the applicable award or agreement and ensure alignment with FW Act requirements.
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Verify job details: Use accurate information about each employee’s role, classification, qualifications, and work conditions.
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Seek expert input: Engage with reputable advisors such as industry bodies, employment lawyers, or the Fair Work Ombudsman.
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Stay current: Regularly review updates to employment legislation and entitlements.
After identifying an underpayment:
Quick and decisive action can greatly reduce the likelihood of facing criminal charges:
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Make repayments promptly: Reimburse any unpaid wages as soon as possible.
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Fix payroll systems: Address and correct any underlying process failures.
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Conduct audits: Regular payroll checks help detect and resolve issues early.
Factors That Lower the Risk of Criminal Charges
Employers are less likely to be prosecuted if:
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The underpayment was a genuine payroll error.
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The mistake arose from confusing or conflicting legal requirements, and the employer acted in good faith.
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The issue was discovered during a voluntary compliance review.
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The employer promptly corrected the problem and compensated affected staff.
Legal Insight and Business Guidance
Australia’s employment laws are complex, making it difficult for small business owners to keep track of every entitlement. At Tax Visory, we recognize the challenges and stress that come with maintaining compliance. The latest changes to wage theft laws serve as a critical reminder to prioritize accurate and transparent payroll processes.
Using tools like the Voluntary Small Business Wage Compliance Code can help businesses stay compliant and avoid penalties. Investing in strong payroll systems and getting the right advice can safeguard your business from financial and reputational harm. Tax Visory offers expert payroll support and integration with software such as Employment Hero. Reach out for a free consultation and learn how we can help your business meet its obligations with confidence.
