As of 1 January 2025, significant changes to Australia’s employment laws have come into effect under the Fair Work Legislation Amendment (Closing Loopholes) Act 2023. These reforms introduce criminal penalties for intentional underpayment of wages, underscoring the importance of compliance for all employers, especially small business owners.
Key Changes Effective 1 January 2025
- Criminalisation of Intentional Underpayment: Deliberate underpayment of employee wages or entitlements is now a criminal offence. This includes intentional failures to pay correct wages, superannuation, leave entitlements, penalties, and allowances. Honest mistakes that are promptly corrected are not subject to these criminal penalties.
- Severe Penalties: Individuals found guilty may face up to 10 years in prison and/or fines exceeding $1 million. Companies could be fined up to $51 million.
Voluntary Small Business Wage Compliance Code
To assist small businesses in navigating these stringent laws, the Fair Work Ombudsman (FWO) has introduced the Voluntary Small Business Wage Compliance Code. This Code offers a framework to help small business employers ensure compliance and avoid criminal prosecution.
Steps to Comply with the Code
- Download the Code: Download the Code from the FWO website and check out their compliance resources.
- Conduct a Comprehensive Payroll Audit: Utilise FWO tools to ensure all employees are receiving their correct wage and condition entitlements, and identify and fix and historical underpayments.
- Implement Best Practices: Adopt recommended payroll management and record-keeping procedures to ensure accurate and up-to-date records of employee roles, entitlements, ages and pay rates.
- Rectify Issues Promptly: If underpayments are identified, address them immediately and inform affected employees.
- Educate Your Team: Ensure staff involved in payroll are knowledgeable about relevant laws and entitlements and how to keep across any changes.
Practical Tips for Small Business Owners
- Stay Informed: Regularly review updates from the Fair Work Ombudsman and industry bodies to stay abreast of changes to pay rates and conditions.
- Invest in Technology: Consider payroll software that automates compliance to reduce errors.
- Seek Professional Advice: Consult with employment law/ human resource management specialists to ensure your business practices are compliant.
Conclusion
The introduction of criminal penalties for underpayment and the Voluntary Small Business Wage Compliance Code signals a shift towards greater accountability in Australian workplaces.
By adhering to the Voluntary Small Business Wage Compliance Code and implementing diligent payroll practices, small business owners can safeguard their operations against legal risks and foster a fair workplace environment.
For more detailed information and to download the Voluntary Small Business Wage Compliance Code, visit the Fair Work Ombudsman’s website.
