As of 1 January 2025, significant changes have been introduced to wage compliance laws in Australia. The intentional underpayment of employee wages or entitlements is now a criminal offence. Here’s what employers need to know to stay compliant and avoid potential penalties.

 

What’s Changed?

Under the new laws:

  • Intentional underpayment of wages or entitlements can lead to criminal prosecution.
  • Convicted offenders may face fines, imprisonment, or both.
  • The Fair Work Ombudsman (FWO) can investigate suspected criminal underpayment offences and refer suitable cases for prosecution.

However, the legislation includes safeguards for businesses that take proactive steps to ensure compliance.

 

Protections for Small Business Employers

Small business employers can protect themselves from criminal prosecution by adhering to the Voluntary Small Business Wage Compliance Code (Code). Employers who comply with the Code in relation to an underpayment cannot be referred for criminal prosecution. Key aspects of the Code include:

  • Practical guidance on paying employees correctly.
  • A checklist, examples, and best practice tips to ensure compliance.
  • Assurance that compliance measures will be assessed based on good business practices.

Businesses of all sizes can also use the Code and its supporting guide to address any payment issues proactively.

 

Cooperation Agreements

Another safeguard for employers is a cooperation agreement. These agreements are written commitments between the FWO and an employer who acknowledges potential conduct that could amount to a criminal underpayment offence. While the agreement is in place, the outlined conduct cannot be referred for criminal prosecution, although civil enforcement options may still apply if necessary.

 

Practical Steps for Employers

Employers can take the following steps to ensure compliance:

1. Review Payment Practices: Regularly audit payroll systems to verify that all employees are paid correctly, including wages and entitlements.

2. Address Discrepancies Quickly: If underpayments are identified, correct them promptly and take steps to prevent future occurrences.

3. Document Compliance Efforts: Maintain clear records of payroll practices, staff training, and any actions taken to ensure compliance with wage laws.

4. Seek Expert Advice: Consult with legal or workplace relations professionals to ensure compliance with the new laws and address any concerns. My Business members can also contact our Workplace Advice Line for assistance. Request a callback here.

5. Stay Informed: Keep up to date with changes to wage compliance legislation and best practices for paying employees correctly.

 

Why Compliance Matters

With these changes, the government aims to address deliberate wage theft while supporting employers committed to doing the right thing. By taking proactive steps to understand and implement the Code and other safeguards, businesses can avoid penalties and foster trust with their employees.