Wage theft legislation: what will it mean for you
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 as wage theft. 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.
Practices can become unstuck if they think there may be a mistake with payroll and do not follow up or seek a second opinion or if an employee comes to them with concerns about their payslip and no action is taken. Negligent actions in these circumstances can lead to wage theft accusations or back payments to staff with additional hefty fines. Small businesses that proactively comply with the upcoming Voluntary Small Business Wage Compliance Code may avoid prosecution and can seek cooperation agreements with the Fair Work Ombudsman by self-reporting any violations.
Further information relating to the Voluntary Small Business Wage Compliance Code is in the link below.
Here is what this mean for you
Legal accountability
Wage theft laws typically make it a criminal offense to deliberately withhold wages, superannuation or entitlements. This can lead to fines, penalties or even imprisonment for severe violations.
Increased penalties
Businesses found guilty of wage theft may face heavy financial penalties and reputational damage.
Potential liability for mistakes
Even unintentional underpayments can carry significant consequences as it does not stop employees taking legal action. Practices must demonstrate efforts to comply, such as implementing accurate payroll systems and payroll measures and conducting regular audits.
How to prepare
- Audit payroll systems: regularly review payroll processes to ensure accuracy and compliance. Invest in payroll software or external audits for accuracy.
- Train staff: educate doctors, practice managers and payroll staff about wage laws and entitlements.
- Use Fair Work tools: by using the Fair Work resources such as the PACT calculator assists practices stay on track, avoid penalties and foster better workplace practices and evidence there is no intention of underpaying wages.
- Seek Workplace Relations advice: understand the specifics of wage theft changes in your state and how they apply to your practice.
Proactively addressing potential issues can protect the practice from severe penalties and maintain trust with employees.
AMA Queensland’s Workplace Relations Team assists employers in ways in which to address potential issues. Our Workplace Relations expertise enables practices to take proactive measures today with the aim to prevent costly mistakes tomorrow.
