Wage Theft: New Criminal Liabilities for Employers in 2025

Starting 1 January 2025, wage theft becomes a criminal offence under the Fair Work Act 2009 (Cth) (FW Act). This represents a significant shift in workplace relations, with serious consequences for employers who fail to pay their workers correctly.

What Constitutes Wage Theft?

An employer commits wage theft when they intentionally withhold wages or entitlements owed under a modern award, enterprise agreement, or other FW Act provisions. If the non-payment is deliberate, the employer could face criminal prosecution.

Unintentional underpayments, however, will remain a civil matter, exposing the employer to potential penalties but not criminal charges.

The Voluntary Small Business Wage Compliance Code

To help businesses navigate this heightened compliance landscape, the Fair Work Ombudsman (FWO) has introduced the Voluntary Small Business Wage Compliance Code. While designed for small businesses (fewer than 15 employees), its principles apply to all employers.

Under the Code, if a small business demonstrates compliance efforts regarding a non-payment issue, the FWO must not refer the case for criminal prosecution. The Code outlines steps to minimize risk and rectify issues effectively.

Steps to Prevent Wage Theft

Employers can reduce their risk of prosecution by making reasonable efforts to ensure compliance with employee pay obligations before an issue arises. This includes:

• Reviewing the applicable award, enterprise agreement, and FW Act provisions.

• Accurately identifying employee classifications, pay rates, allowances, penalties, and entitlements.

• Ensuring employee information (e.g., duties, classification, age, hours, and location) is up-to-date and reliable.

• Seeking advice from credible sources, such as industry associations, legal professionals, or the Fair Work Ombudsman.

• Keeping abreast of legislative updates and changes in employees’ roles or classifications.

What to Do When Underpayment Occurs

If an underpayment issue is identified, employers can further mitigate risk by taking proactive and immediate action, such as:

1. Promptly repaying affected employees.

2. Auditing payroll systems to identify gaps or deficiencies.

3. Implementing measures to prevent repeat issues, like updating systems or obtaining professional advice.

Factors That Can Reduce Prosecution Risk

The following circumstances may also lessen the likelihood of criminal prosecution:

• The underpayment arose from honest errors in payroll or financial processes.

• Confusion due to ambiguous or conflicting pay obligations, despite the employer’s reasonable interpretation.

• The employer identified the issue proactively through a compliance audit.

• Swift action was taken to minimise the impact and rectify the underpayment.

A New Era of Compliance

The new wage theft laws highlight the growing emphasis on accountability in workplace relations. Employers, especially small and medium-sized businesses, must take these changes seriously to protect their operations and their workforce.

By adopting best practices, leveraging the resources provided by the FWO, and staying informed, businesses can navigate this challenging environment effectively.

For more insights and support on managing your workplace obligations, stay connected with us. The HR Cartel is here to help you succeed in the evolving industrial landscape.

The HR Cartel is Australia's most proactive and protective HR & IR solution for Small and Medium Sized employers.

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