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.

The next element of the Albanese Government’s Closing Loopholes changes to the Fair Work Act substantially up the penalties for underpayment of wages and entitlements with a new criminal offence of wage theft.

What’s changing?

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

The penalties for a corporation 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, 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.

Why is this happening?

Over the past decade, there have been numerous high profile cases of organisations from multi-nationals to micro businesses underpaying wages and entitlements, in some cases deliberately and in some negligently and systematically.

Earlier this year, the Fair Work Ombudsman secured record penalties amounting to $10.34 million against the Commonwealth Bank of Australia.  The presiding judge, Justice Bromwich stated:

“The simple fact is that the obligations were readily able to be complied with, and proper checks to ensure that was taking place were not hard to implement. That did not happen, and the message needs to be loud and clear that this is not good enough and will not be tolerated, most significantly for other would-be contraveners, but also as an ongoing warning for CBA and therefore the CBA Group of which it is the dominant member.”

That probably says it all.

What constitutes wage theft?

According to the Fair Work Ombudsman, employers will commit an offence if:

• they’re required to pay an amount to an employee (such as wages), or on behalf of or for the benefit of an employee (such as superannuation) under the Fair Work Act, or an industrial instrument
• they intentionally engage in conduct that results in their failure to pay those amounts to or for the employee on or before the day they’re due to be paid.

They note that this only applies to intentional underpayments that occur after the new provisions take effect but include ones where they are part of a course of conduct that started before the provisions take effect.

What happens if underpayments are accidental or unintentional?

Firstly, employers are liable for rectifying underpayments of wages and other entitlements for up to 6 years retrospectively.

The Fair Work Ombudsman might also require your company to enter into an Enforceable Undertaking (EU).

Typically an EU contains additional obligations. These include:

• an acknowledgement by the employer that the law has not been followed
• an agreement by the employer to do certain actions to fix the breach (for example, remedying an underpayment, apologising, printing a public notice)
• a commitment by the employer to future compliance measures (for example, regular internal audits, training for managers and staff, future reporting to the Fair Work Ombudsman).

Each EU is published on the Fair Work Ombudsman website as a matter of public record and so can be a source of ongoing embarrassment and damage to company brand and reputation.

If you do not comply with a Compliance Notice issued by the Fair Work Ombudsman requiring you to correct breaches and make good on underpayments, they can take you to court to get notices enforced and that can result in significant fines as follows:

• $18,780 per contravention for an individual
• $93,900 per contravention for a company with less than 15 employees
• $469,500 per contravention for a company with 15 or more employees.

And for serious contraventions:

• $187,800 per contravention for an individual
• $939,000 per contravention for a company with less than 15 employees
• $4,695,000 per contravention for a company with 15 or more employees.

Infringement Notices

These are essentially on the spot fines for minor record keeping breaches.

Inspectors can issue infringement notices to an employer for:

• not making and keeping employee records for 7 years
• not issuing pay slips within one working day of paying employees
• not including the required information on a pay slip and/or in an employee record
• advertising a job with pay rates that are less than an employee’s minimum entitlements, where there is no reasonable excuse for not complying.

The infringement amount (fine) is up to:

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

So, even a very minor offence can be very costly plus, if your business is found not to be complying with record keeping requirements, it might lead to the Fair Work Ombudsman investigating for other breaches and potential underpayment of wages.

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 and we can help businesses large and small and of any sector to assure their Fair Work compliance. We have been doing that since 2000.

When you look at the serious costs of getting this stuff wrong, the $1500 plus GST investment in our Workplace Relations Compliance Assessment is a really good investment.

If you need someone to audit your payroll to make sure that you have things set up properly or to calculate underpayments, we can help with that too.

Plus, if you have accidentally got yourself into strife with the Fair Work Ombudsman, we can help you with both getting your compliance sorted and working with the regulator to support you.

If any of that is or interest or you have some other HR issue that you need help with, give us on 0438 533 311 to arrange your free first consultation.

There are some unusual provisions in modern awards and these can deliver unexpected differences in entitlements for employees than what you might expect. For employers in the building and construction and plumbing and fire sprinkler industries, one such surprise is the industry specific redundancy schemes that apply in lieu of the National Employment Standard on redundancy. Here we unpack that.

Most employees in the country have their redundancy entitlements determined by the National Employment Standards which provides for up to 16 weeks of payment depending on how long the employee has been with the company for.

There are, however some exceptions to this – they are employees who receive their entitlements via an external fund that their employers make regular contributions to, like Incolink, or employees whose work is covered by an Industry Specific Redundancy Scheme provided for in a modern award. This is the first of a series of blogs about these exceptions and, in this one, we deal with those applying under the Building and Construction General On-site Award 2020 and the Plumbing and Fire Sprinklers Award 2020.

What is an Industry Specific Redundancy Scheme?

The Fair Work Act 2009 provides that the National Employment Standard on redundancy is displaced by an industry specific redundancy scheme where that is provided for in a modern award or an enterprise agreement. These schemes existed prior to creation of the relevant modern awards and have just been carried over into modern awards. They can have different rules and different levels of entitlement to those prescribed in the National Employment Standard.

What is different about the scheme in the building and plumbing awards?

The particular type of industry specific redundancy scheme that is in the building and plumbing awards was ostensibly created on the basis that employees in the industry typically worked from project to project and therefore were unlikely to accumulate sufficient continuous service with one employer to qualify for redundancy in the normal way. This is certainly not the case with the building and construction businesses which we service as they engage most employees on a continuing basis because they need them on that basis. 

There are three primary differences that apply under this industry specific redundancy scheme as compared to the National Employment Standard:

• There is a different definition of redundancy and
• There is a different set of entitlements to redundancy pay and
• There is no small business exemption

The normal definition of a genuine redundancy is “when the employer or business no longer requires the job to be performed by anyone” as prescribed in the National Employment Standard which provides for up to 16 weeks redundancy pay based on length of continuous service. There is no entitlement in the first year of service.

In contrast, the definition of redundancy in the building and plumbing awards is “an employee who ceases to be employed by the employer for reasons other than those of misconduct or refusal of duty”. That industry specific redundancy scheme provides for a lesser maximum amount of redundancy pay (capped at 8 weeks after 4 years’ service) but also provides for pro rata payment in the first and subsequent years for each completed week of service.

There is also no small business exemption so that employers with less than 15 employees are also up for redundancy payments (unlike under the National Employment Standard).

On face value, you might think that employees covered under these awards are worse off than they would be under the National Employment Standard and, for an employee with more than 5 years service who is genuinely made redundant in the normal way, that would be true.

However, the different definition of redundancy in this industry specific redundancy scheme means that it is not just that genuine redundancy that attracts a redundancy payment.

The building and plumbing awards also state:“Provided that an employee employed for less than 12 months will be entitled to a redundancy/severance payment of 1.75 hours per week of service if, and only if, redundancy is occasioned otherwise than by the employee.”  

So what does all of that mean?

It means that any employee whose employment terminates for any reason other than “misconduct or refusal of duty”  is entitled to a redundancy payment:

• In the first 12 months of employment and thereafter, if the employer initiates the termination eg if an employee is terminated due to genuine redundancy or on performance grounds or on incapacity grounds or due to loss of an essential qualification or any other reason except “misconduct or refusal of duty” plus
• After the first 12 months of employment, if the employee initiates the termination eg if the employee resigns, retires or dies.

So, for example, if you have an employee who resigns after completing 4 or more years of service, you are up for 8 weeks in redundancy pay on top of their other final entitlements. 

What can employers do?

There are a few options.

The first is to make contributions to a redundancy fund like Incolink. The fund then manages any claims made by the employee for redundancy payments. The downside to this is that the costs can be quite high.

Another alternative is to have your own enterprise agreement. Through an enterprise agreement, you can alter or replace Award terms with ones that align more closely with how your company operates. This would allow you to replace the Industry Specific Redundancy Scheme with the NES term which has the normal meaning of redundancy.

It is also possible for employers who pay their employees significantly above the minimum rates specified in the Award to offset an employee’s entitlement to redundancy payments. Any attempt to do so should be spelt out in an employment contract and the employee affected should be made aware of what they are agreeing to in that contract. You, of course, also need to verify that you are actually paying sufficiently above award to set off the redundancy payment.

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 and we can help businesses to manage their obligations to employees in any of the ways we have mentioned in this blog.

If you need assistance with understanding your obligations to your employees or changing how you meet your obligations to employees regarding the Industry Specific Redundancy Scheme or any other HR related matter please don’t hesitate to contact us on 0438 533 311 or at enquiries@ridgelinehr.com.au

In subsequent blogs, we will deal with other Industry Specific Redundancy Schemes applying in other industries, some of which provide for higher redundancy pay than the National Employment Standard and some that provide redundancy pay for small business employers who would otherwise be exempt under the National Employment Standard.