Wage Theft Laws in Australia: What You Need to Know

From 1 January 2025, Australia is taking a hard stance on wage theft. For the first time, intentionally underpaying workers will be a criminal offence, with significant penalties for both businesses and individuals. These changes are not just about payroll accuracy—they’re about creating a corporate culture that prioritises compliance.

So, what do the laws say, and how can your business prepare? Let’s break it down.

What Do the New Laws Say?

The laws make it a criminal offence to intentionally underpay employees, including non-payment of superannuation or long service leave entitlements for some workers.

Here are the key points:

• Intentional Underpayment Defined: Employers must knowingly underpay workers for the offence to apply.

• Penalties: Companies could face fines of up to $7.825 million, while individuals may face fines up to $1.565 million and prison sentences of up to 10 years.

• Liability for Individuals: Directors, executives, and staff could be prosecuted if they aid, abet, or permit the offence.

  
  

What Does ‘Intentional’ Underpayment Mean?

An intentional underpayment happens when an employer:

• Knows their actions will result in underpayment, or

• Is aware that underpayment will occur in the normal course of events.

For businesses, intention can also be proven if:

• Directors or senior managers authorised or permitted the offence, or

• A corporate culture existed that encouraged or tolerated non-compliance, or

• The business failed to maintain a corporate culture of compliance.

Corporate Culture and Compliance: Why It Matters

This new focus on corporate culture is groundbreaking. Under the laws, businesses must actively create and maintain systems that ensure compliance with the Fair Work Act. Simply setting up payroll software isn’t enough anymore.

A culture of compliance involves:

• Policies: Clear rules and guidelines on correct pay practices.

• Training: Ensuring staff understand their responsibilities.

• Audits: Regular reviews of payroll to catch and correct errors.

• Accountability: Systems to ensure that breaches are identified and rectified.

Steps to Prepare for Wage Theft Laws

1. Conduct a Payroll Audit

Review your payroll systems, processes, and records to ensure employees are being paid correctly.

2. Create a Compliance Plan

Develop a comprehensive plan to identify and address risks, including training for payroll staff and regular audits.

3. Strengthen Corporate Culture

Foster an environment where compliance is a priority, from leadership to frontline staff.

4. Review Contracts and Agreements

Ensure employment contracts and enterprise agreements comply with the Fair Work Act and relevant awards.

5. Stay Informed

Monitor updates from the Fair Work Ombudsman and consider engaging experts to guide your compliance efforts.

Safe-Haven Protections for Businesses

To help businesses comply, the government has introduced protections:

• Small Businesses: Following the Voluntary Small Business Wage Compliance Code can prevent criminal prosecution.

• Larger Businesses: Self-reporting breaches to the Fair Work Ombudsman and entering cooperation agreements may preclude prosecution.

How Warhorse HR Can Help

At Warhorse HR, we’re here to make compliance straightforward and stress-free:

• Payroll Compliance Audits: Identify and fix vulnerabilities in your payroll system.

• Custom Compliance Plans: Tailored strategies to ensure your business meets legal requirements.

• Training Programs: Equip your team with the knowledge to get payroll right.

• Corporate Culture Consulting: Help you foster a culture of compliance from the top down.

  
  

Don’t wait for the laws to take effect—start preparing now. Contact us today.