As of January 1, 2025, new laws have come into effect to criminalise wage theft. These laws aim to protect employees and ensure they receive their rightful pay and entitlements. Here's what you need to know about these new laws, especially the severe penalties for non-compliance.

What is wage theft?

Wage theft occurs when an employer intentionally underpays an employee or withholds their entitlements. This can include: 

  • Failing to pay correct wages, including penalty rates, overtime rates, allowances, and leave entitlements. 
  • Not paying superannuation contributions when required. 
  • Not paying amounts specified in the applicable award or enterprise agreement. 

Penalties for wage theft

The penalties for wage theft are significant and can include both imprisonment and substantial fines: 

For individuals: 

  • Maximum of 10 years imprisonment.

  • A fine of up to the greater of three times the underpayment amount or 5,000 penalty units (currently $1,650,000).

For companies: 

  • A fine of up to the greater of three times the underpayment amount or 25,000 penalty units (currently $8,250,000).

Who is responsible? 

It’s not just business owners who can face prosecution. Other individuals involved in the underpayment process, such as payroll managers or accountants, can also be held criminally liable if their conduct contributed to the intentional underpayment. 

Important note: It’s crucial to understand that these laws target intentional underpayments. Honest mistakes or miscalculations will not be subject to criminal charges. 

Safeguards for small businesses

A Voluntary Small Business Wage Compliance Code (VSBWCC) has been established to protect small businesses (those with less than 15 employees) from criminal prosecution for underpayments. The Fair Work Ombudsman (FWO) cannot refer a small business for criminal prosecution if they demonstrate compliance with the Code. 

To comply with the VSBWCC, small businesses should: 

1. Check pay rates and entitlements

2. Follow pay slip and record-keeping obligations

3. Stay up to date with workplace laws

4. Get help if you need it, and

5. Fix any issues quickly if they occur.

Cooperation agreements offer a way forward 

Employers can potentially avoid prosecution by entering into a cooperation agreement with the Fair Work Ombudsman (FWO). These agreements offer protection if the employer fully cooperates with the FWO’s investigation, rectifies the underpayment by back-paying affected employees, and takes measures to prevent future occurrences. 

Key takeaways

  • The new wage theft laws impose severe penalties for intentional underpayments. 
  • Prioritising accurate record-keeping and staying informed about relevant awards and pay rates is essential. 
  • Small businesses can protect themselves by complying with the VSBWCC. 

We’re here to help 

Please get in touch with your Ulton Advisor if you have any questions or concerns relating to your circumstances. 


Sources: 

FairWork website: https://www.fairwork.gov.au/about-us/workplace-laws/legislation-changes/closing-loopholes/criminalising-wage-underpayments-and-other-issues 

Voluntary Small Business Wage Compliance Code: https://www.fairwork.gov.au/about-us/compliance-and-enforcement/criminal-prosecution/voluntary-small-business-wage-compliance-code 

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