The introduction of a new crime of “wage theft” has been widely publicized over the last 12 months and came as no surprise after the corporate employee underpayment scandals of the last decade.
This new statutory regime of criminalizing underpayment of wages commenced operation from the 1st of January 2025, and many members have expressed concern as to how these laws will operate and what risk business owners face given the complexity of Awards and how easy it is to make a mistake with payroll.
Our first piece of advice is, “Don’t Panic”.
These laws are aimed at those businesses, and business owners, who have designed their business to rely on underpaying their staff to make any profit or a bigger profit than they otherwise would have. The new laws are not designed to punish employers who make an honest mistake, even if that mistake has led to a large underpayment.
In deciding whether to launch a prosecution under these laws the Fair Work Ombudsman (FWO) considers a number of factors. Members should familiarise themselves with these factors so they understand how to best meet their obligations under the legislation. The following is not an exhaustive list of all factors that the FWO will take into account but is taken from their Compliance and Enforcement Policy document.
The full version of this document is available to read here.
Small businesses (those with fewer than 15 employees) have an added defense because there is a “Voluntary Small Business Wage Compliance Code” which, if met, means that the Fair Work Ombudsman (FWO) is not permitted to prosecute the business for a criminal offence. The FWO can still launch compliance actions and seek a civil penalty, but they cannot launch a criminal prosecution. The difference between the two is a criminal prosecution may lead to a term of imprisonment and/or a fine, plus a criminal conviction, whereas a civil prosecution can only lead to a financial penalty and/or compensation for the employee concerned.
The FWO has prepared a summary and explanation of this new Code which can be accessed here: Voluntary Small Business Wage Compliance Code
Essentially, as long as a small business employer has sought advice regarding the correct wages and entitlements for their employees, and acted on that advice, they cannot be prosecuted. This is why it is vital that members stay in contact with us and seek advice if they have any questions about the wages and conditions of their employees.
Whilst our members have always tried to do the right thing and don’t actively seek to underpay their staff, we know that mistakes happen and sometimes those mistakes have significant consequences. Now however, those consequences are more than just significant for an underpaid employee, they can be catastrophic for the employer.
NBIA Members receive free unlimited phone and email IR & HR support as part of their membership. If you need assistance with wage theft laws or other IR/HR questions, please contact the NBIA head office on 1300 557 022 or via email.