Wage theft becomes a criminal offence from 1 January 2025 but small businesses will have some protections if they comply with the Voluntary Small Business Compliance Code which has just been published by the Fair Work Ombudsman.

What’s changing?

From 1 January 2025, “wage theft” will become a criminal offence.

The penalties for a corporation with 15 or more employees found to have engaged in wage theft will be:

• if the court can determine the underpayment, the greater of 3 times the amount of the underpayment and $7.825 million, or
• if the court can’t determine the underpayment, $7.825 million. 

And for an individual found to have engaged in wage theft, they will be:

• up to 10 years’ imprisonment and
• if the court can determine the underpayment, the greater of 3 times the amount of the underpayment and $$1.565 million, or
• if the court can’t determine the underpayment, $1.565 million. 

Cases of criminal prosecution for wage theft will be referred to the Commonwealth Director of Public Prosecutions or the Australian Federal Police for consideration and prosecution where appropriate.

That won’t happen with small businesses which are deemed to be compliant with the Voluntary Small Business Compliance Code.

What is required to comply with the Code?

The Code  sets out relevant matters that are to be considered in determining whether an employer is compliant with the code. These are whether the employer has done any or all of the following:

1. Made reasonable efforts to ascertain correct rates of pay and entitlements for the employee;
2. Made reasonable efforts to stay up to date with the employer’s obligations relating to the payment of applicable amounts to, on behalf of, or for the benefit of, the employee;
3. Considered and relied on information about the employee that the employer reasonably believed was accurate (such as the employee’s role, duties, classification, relevant qualifications, age, hours of work and location of work) in relation to the payment of applicable amounts to, on behalf of, or for the benefit of, the employee;
4. Sought information or advice from reliable sources in relation to the payment of applicable amounts to, on behalf of, or for the benefit of, the employee;
5. Provided information that the employer reasonably believed was accurate in seeking that information or advice;
6. Taken reasonable steps to rectify the failure to pay the applicable amount after becoming aware of the failure;
7. Cooperated with any relevant inquiry or investigation by the Fair Work Ombudsman after becoming aware of the failure to pay the applicable amount.

Additionally, consideration may be given to any other circumstances relating to the failure to pay the applicable amount or how the employer became aware of the failure.

Download the Fair Work Ombudsman publication “A guide to paying employees correctly and the voluntary small business wage compliance code”

What does this mean for small businesses?

As with many other legal obligations in business, there is a need to ensure that you have access to competent professional advice.

That is made fairly explicit in the Code at item #4 above which states: “sought information or advice from reliable sources…..”. Among those listed in the Code as reliable sources are “professional industrial consultants” which would include HR consultancies like us which have a strong level of knowledge and experience in workplace relations law like the Fair Work Act and Regulations and modern awards.  

And for larger businesses?

Where underpayments have been detected, an employer can self report to the Fair Work Ombudsman and enter into a “Compliance Partnership”, one effect of which is that they won’t be prosecuted for wage theft.

Civil penalties still apply

The fact that a small business might be technically compliant with the Code or that a larger business might have self-reported and entered into a compliance partnership does not mean that the Fair Work Ombudsman will not apply to the Courts for civil penalties and these are significant:

• for an individual:
  • $19,800 per contravention
  • $198,000 per contravention for some ‘serious contraventions’
• for a company with less than 15 employees:
  • $99,000 per contravention
  • $990,000 per contravention for some ‘serious contraventions’
• for a company with 15 or more employees:
  • $495,000 per contravention
  • $4,950,000 per contravention for some ‘serious contraventions’.

 The Fair Work Ombudsman can also impose on the spot fines via Infringement Notices for deficiencies in compliance with requirements regarding record keeping and payslips. Thes fines can be up to:

• $1,980 per breach for an individual
• $9,900 per breach for as company

How can we help?

At Ridgeline HR. we have a long history of assisting clients with navigating the intricacies of the Fair Work Act and Modern Awards.  We can help businesses large and small and of any sector to assure their Fair Work compliance. We have been doing that since 2000.

We can help you with every one of the relevant matters set out in the Code and we can even draw up a Compliance Statement about how your business assures ongoing satisfaction of each of the relevant matters in the Code and your legal obligations to your employees.

If you inadvertently make mistakes, we can help you to calculate underpayments and fix them and assist you in negotiations with your employees and with the Fair Work Ombudsman.

If any of that is or interest or you have some other HR issue that you need help with, give us on 1300 108 488 to arrange your free first consultation.