Have you prepared for the new wage theft laws?

From 1 January 2025, intentionally underpaying an employee’s wages or entitlements can be a criminal offence. This doesn’t include honest mistakes. Employers (including individual directors) who deliberately withhold payment of employee wage entitlements under the Fair Work Act 2009 (FWAct) now face penalties of up to 10 years’ imprisonment and / or fines of up to $7.8 million.

So what does this mean for you?

We take a deep dive into the elements of the offence, and explain self-disclosure and steps you should be taking to ensure that

What constitutes wage theft?

The criminal offence of wage theft under the (FWAct) will be committed if all the following occur:

• The employer is required to pay an amount under the FWAct or an instrument made under the FWAct, e.g. a modern award or an enterprise agreement.
• The amount is not an excluded category of payment. Excluded payments are long service leave, superannuation, paid leave as a victim of crime, jury service or emergency services.
• The employer engages in conduct, i.e. an act or omit to perform an act
• There is proof beyond reasonable doubt that the employer meant to engage in the conduct.
• The act or omission results in a failure to pay the required amount on the day it was due.

In simple terms, if it is found beyond a reasonable doubt you deliberately underpay your employees, or knew that your actions would lead to underpayment, even if you didn’t specifically intend it, then you will have committed wage theft.

What if we self-disclose wage theft?

There are protections in place for businesses to avoid criminal prosecution. This includes the Voluntary Small Business Wage Compliance Code (Code) and cooperation agreements for larger businesses that self-disclose.

For small business – a copy of the code can be found here

For larger businesses –  the Fair Work Ombudsman (FWO) will consider a range of factors before entering into an agreement, including the employer’s level of cooperation, their frankness, the gravity of the conduct and their history of compliance. If an agreement is entered into, the FWO is unable to refer the conduct to the Director of Public Prosecutions or the Australian Federal Police.

Compliance with the Small Business Code or self -disclosure, does not prevent an inspector from beginning or continuing civil proceedings in relation to the conduct. A compliance notice, an enforceable undertaking and civil penalties may still occur.

Five steps you can take now as an employer:

1. Review and update the classification of all current employees under their applicable award or agreement to ensure they are paid correctly.
2. Review current payroll systems to ensure they reflect any updates to employee entitlements.
3. When in doubt as to the classification of employees or potential underpayment, seek information or advice from a reliable source – this includes us at Total HRM.
4. If an employee tells you that they think they have been underpaid, do a thorough check to see if they are right.
5. If there is an underpayment, take steps to repay it as soon as possible and put systems in place to prevent it happening again.