From 1 January 2025, intentional underpayment of wages became a criminal offence for small business employers.
This change marked a major shift in how wage non-compliance is treated under the law. While honest mistakes are not criminal, businesses that knowingly underpay employees can now face prosecution.
What Is Wage Theft?
Under the Fair Work Act 2009, wage theft occurs when an employer deliberately underpays wages or entitlements.
This includes:
- Paying less than minimum rates on purpose
- Failing to pay allowances, penalties or overtime where it is clearly owed
- Ignoring award classifications or entitlements despite being aware of them
- Choosing not to act after discovering an underpayment
Wage theft is about intent. If the conduct was deliberate, it may be prosecuted as a criminal offence. If the conduct was a genuine mistake, it may still lead to civil penalties, but not a criminal charge.
Key Changes
Before 2025, wage underpayments were dealt with as civil matters. Under the amended Fair Work Act 2009, the following changes have been implemented on 1 January.
Now:
- Employers can face criminal prosecution for deliberate underpayments
- Penalties may include fines or jail
- The Fair Work Ombudsman may refer serious cases to prosecutors
- Civil penalties still apply in other cases, including compliance notices or litigation
This is a significant development for employers. The bar has been raised. It is no longer enough to simply fix errors after they happen. Employers are expected to take active steps to understand and meet their obligations.
Protections of The Code
Small business employers have one important protection. If they complied with the Voluntary Small Business Wage Compliance Code, they cannot be referred for criminal prosecution.
When determining compliance with Code, the Fair Work Ombudsman will consider several factors, including whether the employer:
- Took steps to confirm the correct pay rates
- Stayed up to date with award changes or legal obligations
- Relied on accurate information about their employees
- Sought advice from a reliable source, such as a lawyer or the Fair Work Ombudsman
- Provided accurate information when asking for that advice
- Acted quickly to fix the problem
- Cooperated with any investigation
Key Takeaways for Employers
> Keep up to date with your Legal Obligations
Employers should schedule regular reviews, practicing proactive compliance.
> Document Compliance Efforts
Being able to show what steps were taken, and when, is now essential. Good records may be the difference between a mistake and a criminal offence.
> Seek Professional Advice
If you are unsure about your pay obligations, get advice from a qualified expert such as an employment lawyer or industry body.
Final Thoughts
The criminalisation of wage theft highlights the importance of diligent compliance with wage laws. Small businesses must take a proactive stance, reviewing and adjusting practices to meet legal expectations.
IRiQ’s Wage Compliance Review is an effective way to demonstrate good faith, rectify risks early, and safeguard against prosecution. It provides small businesses with the opportunity to assess risk, document the steps taken to comply with the Code, and receive tailored advice from an experienced IR lawyer.
IRiQ’s Wage Compliance Review
This one-on-one service is conducted under legal professional privilege and is specifically designed to help you meet the expectations of the Small Business Wage Compliance Code. It includes:
- One-on-one consultation with an experienced IR lawyer
- Guidance on award interpretation and classification accuracy
- Tailored compliance recommendations
- Documentation to demonstrate adherence to the Code
- Protection under legal professional privilege
Book your wage compliance review here.
If you have any questions or need further guidance, please don’t hesitate to get in touch with our team below.
Get In Touch
Our team provide employment law, industrial relations and safety expertise when you need it most.
Latest News
Posted in News