Wage Theft, Fines, and Jail Time – What Employers Need to Know in 2025
- Tim Dive
- Jan 16
- 3 min read
Welcome to 2025, a year that ushers in a significant shift in Australia’s employment landscape. Wage theft has officially been criminalized under the Fair Work Act, with fines soaring to $8 million for companies and $1.6 million for individuals.
In severe cases, employers could even face up to 10 years in prison. With these changes, businesses must adapt swiftly and diligently. Here’s a breakdown of what you need to know.
Understanding Wage Theft
Wage theft goes beyond simply underpaying employees. It encompasses any failure to pay an employee their due entitlements under a modern award, enterprise agreement, or the Fair Work Act. This includes base rates of pay, overtime, allowances, and penalty rates.
If an employer’s underpayment is deemed intentional (such as neglecting to review or comply with award conditions), it can be classified as criminal conduct. Accidental underpayments, however, remain subject to civil penalties rather than criminal charges.
So - just because you feel as though any errors may not be "intentional" by definition, this doesn't mean the Ombudsman won't pursue your business and litigate.
The Voluntary Small Business Wage Compliance Code
To help small businesses navigate these complexities, the Fair Work Ombudsman (FWO) has introduced the Voluntary Small Business Wage Compliance Code Declaration 2024.
While it’s not exhaustive, it offers a starting point for employers to demonstrate that any wage discrepancies were unintentional. Compliance with this code can reduce the risk of criminal liability.
Key aspects of the code include:
Proactive Efforts: Employers must take reasonable steps to determine correct pay rates and entitlements by referencing applicable awards or agreements.
Reliable Advice: Seeking advice from industrial relations professionals, such as HR consultants or legal advisors, is crucial. Documentation of this advice can provide vital evidence if disputes arise.
Regular Updates: Employers must stay informed about changes to awards, legislation, and workplace obligations.
Prompt Rectification: Upon identifying an underpayment, businesses should act quickly to correct it and implement measures to prevent future issues.
Avoiding Common Pitfalls
Many employers mistakenly believe that paying above-award rates guarantees compliance. However, unless contracts explicitly state how loadings, allowances, and penalties are offset, these payments might still fall short.
To avoid unintentional breaches:
Regularly review position descriptions to ensure accurate classifications.
Conduct internal payroll audits to identify and address discrepancies.
Maintain detailed employee records, including roles, qualifications, and working hours.
Small businesses often struggle with the complexity of awards and the ever-changing legal landscape. This is where having reliable support, like a professional HR partner, becomes indispensable.
The Role of the HR Cartel
Navigating these changes doesn’t have to be overwhelming. The HR Cartel platform offers small and medium-sized businesses a trusted resource for compliance advice, updates, and support.
Members gain access to:
Real-time updates on legislative changes.
Industrial relations expertise to clarify award interpretations.
Proactive guidance to minimize compliance risks.
Being part of the HR Cartel isn’t just about accessing information; it’s about having a partner to help you stay ahead in a demanding and high-stakes environment.
What’s Next?
The criminalization of wage theft marks a significant cultural and operational shift for Australian businesses. Employers must now prove not only their compliance but also their intent to operate lawfully.
With the Fair Work Ombudsman emphasizing proactive compliance and the potential for harsh penalties, 2025 is the year to prioritize robust payroll practices.
If you’re unsure where to start, begin by conducting an audit of your payroll and compliance processes. Seek advice from trusted professionals, and make use of tools like the HR Cartel platform to stay informed and supported.
Let’s make 2025 the year of proactive compliance and positive change. For more information on the HR Cartel and how it can support your business, visit www.hrcartel.com
Stay vigilant, stay informed, and stay compliant!
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