As of 1 January 2025, Australia’s workplace laws have been significantly updated to tackle wage theft, making intentional underpayment of employees a criminal offence. These changes are aimed at protecting workers and ensuring employers pay fair wages for the work performed. Here’s what you need to know, including the financial penalties for non-compliance.
What’s Changing?
Under the Fair Work Act 2009 (Cth), intentional underpayment will now be treated as a criminal offence. Employers who knowingly underpay workers will face severe penalties, including substantial fines and potential imprisonment. This reform is designed to hold employers accountable for deliberately short-changing employees and ensures that those who engage in wage theft are held responsible for their actions.
Penalties for Underpayment
Only a court can determine the exact penalty amount to be paid, and civil penalty amounts can be up to:
- For an individual:
- $19,800 per contravention
- $198,000 per contravention for ‘serious contraventions’
- For small businesses with fewer than 15 employees:
- $99,000 per contravention
- $990,000 per contravention for ‘serious contraventions’
- For a company with 15 or more employees:
- $495,000 per contravention, or, for contraventions relating to underpayment, the greater of $495,000 or three times the underpayment amount per contravention
- $4,950,000 per contravention, or, for contraventions relating to underpayment, the greater of $4,950,000 or three times the underpayment amount per contravention for ‘serious contraventions’.
These penalties underscore the seriousness of wage theft and its consequences in the workplace.
How Does This Affect Employers?
For employers, this law change requires immediate action to ensure compliance. Here are the key points employers should be aware of:
- Accurate Record-Keeping: Employers must maintain precise and up-to-date records of employee wages and working hours. This documentation is essential for demonstrating compliance with wage laws and protecting the business from potential legal consequences.
- Review Pay Systems: Employers should thoroughly audit their payroll systems to identify and rectify any past errors in employee pay. Ensuring correct payments moving forward is crucial to avoid severe penalties.
- Training & Awareness: Educating staff about the new regulations is essential. Managers and HR personnel should be trained to spot underpayment issues and take corrective action promptly.
- Legal Responsibility: The new law focuses on intentional underpayment. However, employers must be aware that negligence or repeated mistakes could still lead to scrutiny or legal action. Ensuring payroll accuracy is key to preventing costly legal disputes.
- Seek Expert Guidance: Given the complexities involved in complying with these laws, employers should consider seeking professional advice to ensure their business is fully compliant. For expert advice, reach out to Elisia Coetzee, Director & Principal HR Consultant at Strategic HR Australia.
How Does This Affect Employees?
Employees now have greater protections under these new laws. If you believe you have been underpaid and it was intentional, you can take action against your employer.
Employees should:
- Know Your Rights: Be aware of the pay rates and entitlements you’re entitled to under the Fair Work Act. If you’re unsure, visit the Fair Work website or consult with your union representative.
- Report Wage Theft: If you suspect your employer is intentionally underpaying you or others, it’s important to report the issue. There are legal avenues for reporting wage theft, and you can take your case to the Fair Work Commission or other appropriate bodies.
- Stay Informed: Employees should stay updated on changes to the law, especially around their rights regarding pay and conditions, to ensure they are not being exploited.
Conclusion
The new criminal underpayment laws, which took effect on 1 January 2025, are a significant step towards fairer workplaces. Employers must ensure they are paying their employees correctly, keeping accurate records, and training staff to prevent underpayment. Employees, on the other hand, should be vigilant and aware of their rights to ensure they are paid what they are owed.
These changes aim to foster a more ethical and fair work environment across Australia, reducing wage theft and enhancing worker protections. Both employers and employees need to stay informed and take proactive steps to avoid the legal consequences of non-compliance.
