Legislative Changes: Criminalising wage underpayments/Small Business Code
Wage theft legislation introduces stricter legal measures to ensure employees are paid correctly and on time.
Starting 1 January 2025, Fair Work Legislation Amendment (Closing Loopholes) Act 2023 will come into force, introducing criminal penalties for wage theft. In recent class actions, employers proven to have intentionally underpaid or withheld employee wages and entitlements may face up to 10 years in prison and fines reaching $1.5 million for individuals or $7.8 million for corporations. This represents a significant shift in wage theft enforcement from civil to criminal penalties, creating a strong deterrent and aligning federal policies with existing state laws in Queensland. This is not a new concept as it is already a criminal offence in Victoria. This will however unify the rest of Australia.
The legislation specifically targets deliberate underpayment, while isolated or unintentional errors, if quickly corrected, will not typically be prosecuted through the Fair Work Ombudsman. The legislation differentiates between inadvertent payroll errors (considered unintentional underpayments) and wage theft, which requires clear evidence that the employer acted with intent to short change employees. However, this will not take away from the fact that an employee can take further action which may result in criminal action being pursued.
Small Business Wage Compliance Code
For small businesses with less than 15 employees, the Voluntary Small Business Wage Compliance Code means small business will not be criminally prosecuted for the underpayment of their employee.
On 16 December 2024, Fair Work released the Voluntary Small Business Wage Compliance Code which provides protections for small businesses to avoid criminal prosecution.
The link to the guide is below and provides nine pages of very important information split into:
- a guide to paying employees correctly
- understand how the Code applies
- frequently asked questions
Voluntary Small Business Wage Compliance Code - Fair Work Ombudsman
The Workplace Relations Team lends their expertise to providing tips, tools and training to find your way in people rated matters including how to apply the Small Business Wage Compliance Code.
