From 1 January 2025, new federal wage theft laws will come into force across Australia, marking a significant shift in compliance requirements for employers.
In this article, we outline the potential penalties under the Fair Work Act 2009 (FW Act) for deliberate underpayment of wages, superannuation and other entitlements.
What is wage theft?
Wage theft occurs when employers knowingly and intentionally underpay workers or withhold their entitlements. This includes failing to pay minimum rates of pay, overtime rates, penalty rates, and superannuation, amongst other things.
Historically, underpayments of wages were not considered "theft" and affected employees could only seek civil remedies against their employer.
From 1 January 2025, the FW Act will provide that an employer commits wage theft if they intentionally engage in conduct which results in a failure to pay an employee the amounts to which they are entitled.
With the introduction of these laws, intentional wage theft will be considered a criminal offence and could lead to serious consequences for companies and individuals, including significant fines and terms of imprisonment for company directors, senior officers and other decision-makers.
What are the penalties?
Under the new laws, individuals will face fines up to $1.56 million (or three times the amount of the underpayment, whichever is greater) or ten years in prison, while corporations will risk penalties of up to $7.825 million (or three times the amount of the underpayment, whichever is greater).
While there are 'grouping' provisions under section 557 of the FW Act which can deem numerous contraventions to be a single contravention, the maximum penalties above theoretically apply to any individual breach of the wage theft laws.
The Fair Work Ombudsman (FWO), in its role as workplace regulator, is responsible for investigating and, where appropriate, prosecuting companies and individuals for wage theft. Employers who fail to comply with compliance notices issued by the FWO may face additional financial penalties.
How can you prepare?
Employers should take proactive steps to review their payroll processes, any applicable awards and/or enterprise agreements and their employee's employment contracts to ensure that their employees are paid in full, on time and in accordance with the correct classification for the work they perform.
While Australia's modern award system ensures consistency for employees, it is particularly complicated and burdensome on employers. Conducting payrolls audits, arranging training for Human Resources teams and seeking legal advice on particularly complicated matters can help mitigate your risks.
For businesses which are already compliant, these laws reinforce the importance of maintaining robust systems and payroll review processes.
The wage theft laws reflect a marked shift on protecting employee rights and holding employers accountable for conduct – or a lack of conduct – which results in employees receiving less than their lawful entitlements. Failing to act now could have far-reaching financial and reputational consequences for your business.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
