As of 1 January 2025, wage theft in Australia is classified as a criminal offence. Employers must now navigate this new legal landscape to avoid severe penalties. 

Wage theft, including underpayment of wages and withholding entitlements, has been a persistent issue. The new legislation aims to ensure fair treatment of employees and holds employers accountable for intentional underpayments. 

For employers, this law underscores the importance of compliance. Adhering to wage laws not only protects your business from hefty fines and imprisonment but also fosters a positive workplace culture, instils trust between the employer and employee and enhances your company’s reputation. 

Before we go ahead, it’s important to understand the current minimum wage rates and how they apply to different types of employment. This knowledge is crucial for ensuring compliance with wage laws and avoiding potential penalties.  

National Minimum Wage 

  • Standard Rate: As of 1 July 2024, the national minimum wage is $24.10 per hour or $915.90 per week for a 38-hour week. 

Special National Minimum Wages 

  1. Casual Employees: Casual employees receive a 25% loading on top of the national minimum wage. 
  2. Junior Employees: Employees under 21 years old receive a percentage of the national minimum wage based on their age. For more detailed information, you can visit the Fair Work Ombudsman. 
  3. Apprentices and Trainees: The rates for apprentices and trainees are based on the Miscellaneous Award 2020.  
  4. Employees with Disabilities: 
    • Without Productivity Impact: Same as the national minimum wage. 
    • With Productivity Impact: A percentage of the national minimum wage, depending on the level of productivity. For more detailed information, you can visit the Fair Work Ombudsman. 

 

What is an Example of Wage Theft in Australia?

Wage theft can take many forms and understanding these can help employers avoid unintentional violations. Here are some detailed examples: 

  1. Underpayment of Wages: This occurs when employers pay their employees less than the minimum wage stipulated by the Fair Work Act 2009 or an enterprise agreement. For instance, the minimum wage is $24.10 per hour. If an employee is intentionally paid only $18 per hour, this constitutes wage theft.  Regular audits of remuneration compliance and payroll systems and procedures can help prevent such underpayments. 
  2. Incorrect Leave Entitlements: Employees are entitled to various types of leave, such as annual leave, personal leave, and parental leave. Employers must calculate the correct accrual of leave entitlements and payment for leave taken. For instance, if an employee takes annual leave but does not receive correct payment based off their entitlement, it constitutes wage theft. Ensuring accurate leave records and policies can prevent such errors. 
  3. Misclassification of Employees: Employers must correctly classify workers as employees or independent contractors. Misclassification to avoid paying entitlements such as superannuation and overtime can lead to underpayment. For example, if a worker performs duties similar to those of an employee but is classified as a contractor and paid less, it constitutes wage theft. Clear guidelines and regular reviews of worker classifications can help maintain compliance.

 

What is the Most Common Form of Wage Theft?

The most common form of wage theft in Australia is unpaid overtime. This occurs when employees work beyond their standard hours but do not receive the appropriate overtime pay. Depending on the employees’ contract, underlying award, or enterprise agreement, employers are required to compensate employees for these extra hours at a higher rate, typically specified in the Fair Work Act 2009 or relevant enterprise agreements. However, some employers fail to track or intentionally ignore these additional hours, leading to significant underpayment. 

Unpaid overtime can take various forms, such as: 

  • Not Paying Overtime Rates: Employees may be paid their regular hourly rate instead of the higher overtime rate for hours worked beyond their standard schedule. 
  • Unrecorded Work Hours: Employers might not record all the hours an employee works, especially if the work is done outside regular business hours or off-site. 
  • Expecting Unpaid Extra Work: Some employers may expect employees to complete tasks outside their normal working hours without additional pay, often under the guise of “dedication” or “team spirit.” 

This form of wage theft is particularly prevalent in industries with irregular hours or high demands, such as hospitality, retail, and healthcare. Employers can avoid this by implementing robust time-tracking systems, regularly reviewing payroll practices, and ensuring compliance with overtime regulations. 

 

Who is Liable for Wage Theft?

In Australia, liability for wage theft extends beyond just the employer. The new legislation holds various parties accountable for intentional underpayment of wages. Here are the key individuals and entities that can be held liable: 

  1. Employers: The primary responsibility for wage theft lies with the employer, whether it is a company or an individual business owner. Employers are required to pay their employees correctly and on time, as stipulated by the Fair Work Act 2009 and relevant industrial instruments. 
  2. Company Directors and Officers: Directors and officers of a company can be held personally liable if they are found to have been involved in or have knowingly allowed wage theft to occur. This includes CEOs, CFOs, and other senior management who have a duty to ensure compliance with wage laws. 
  3. Payroll and HR Managers: Individuals responsible for managing payroll and human resources can also be held accountable if they intentionally engage in or facilitate wage theft. This includes actions such as manipulating payroll records or failing to rectify known underpayments. 
  4. Contractors and Subcontractors: In some cases, contractors and subcontractors who are involved in the employment process can be held liable for wage theft. This is particularly relevant in industries where subcontracting is common, such as construction and hospitality. 
  5. Franchisees and Franchisors: Both franchisees and franchisors can be held liable for wage theft within a franchise network. Franchisors are expected to ensure that their franchisees comply with wage laws and can be held accountable if they fail to take reasonable steps to prevent wage theft. 

Penalties for Wage Theft

Starting from 1 January 2025, businesses in Australia that deliberately underpay their employees will face severe penalties under the new wage theft laws. Here are the key penalties: 

  1. Imprisonment: Employers found guilty of intentional wage theft can face up to 10 years in prison. 
  2. Monetary Fines 
    • For Individuals:
      • Imprisonment: Up to 10 years. 
      • Fines: The greater of three times the value of the wage underpayment or $1.5 million. 
    • For Companies: 
      • Fines: The greater of three times the value of the wage underpayment or $7.8 million. 
    • Criminal Record: Convictions for wage theft will result in a criminal record for the business and potentially for individuals involved, such as company directors and officers. 
  3. Civil Penalties: In addition to criminal penalties, businesses may also face civil penalties, including orders to repay the underpaid amounts with interest. 

According to the Fair Work Ombudsman, the criminal penalties for wage theft do not apply to certain types of payments for specific employees: 

  1. Superannuation Contributions: The provisions do not apply to superannuation contributions. 
  2. Long Service Leave Payments: Payments for taking long service leave are excluded. 
  3. Leave Connected with Being the Victim of a Crime: Payments for taking leave due to being a victim of a crime are not covered. 
  4. Jury Duty Leave or Emergency Services Duties: Payments for taking jury duty leave or for emergency services duties are also excluded. 

These exceptions are important for employers to be aware of to ensure they are compliant with the law while understanding the scope of the new wage theft provisions. 

Applicability of Wage Theft Penalties and Support for Businesses

The penalties for wage theft apply to all businesses in Australia, regardless of size or industry. However, there are specific provisions to support small businesses. For instance, the Voluntary Small Business Wage Compliance Code helps small business employers meet their obligations and avoid criminal prosecution if they comply with the code. Large businesses also can self-report suspected wage theft to the Fair Work Ombudsman and enter into a cooperation agreement. 

Furthermore, the criminal penalties for wage theft do not apply to honest mistakes. The law specifically targets intentional underpayment of wages or entitlements. If an employer unintentionally underpays their employees due to a genuine mistake, they will not face criminal charges. However, employers must rectify any underpayments promptly to avoid civil penalties and ensure compliance with wage laws.
 

Addressing and Preventing Underpayments

If a business mistakenly underpays its staff, it is important to address the issue as soon as possible. The Fair Work Ombudsman provides a step-by-step guide on how to fix underpayments. Employers should: 

  1. Identify the Underpayment: Review payroll records to determine the extent of the underpayment. 
  2. Calculate the Correct Amount: Ensure that the correct pay rates and entitlements are applied. 
  3. Pay the Owed Amounts: Pay the underpaid amounts to the affected employees, including any interest if applicable. 
  4. Prevent Future Underpayments: Implement measures to prevent similar mistakes in the future, such as regular payroll audits and staff training. 

By taking these steps, businesses can demonstrate their commitment to fair employment practices and avoid further legal issues. 

Moreover, when the Fair Work Ombudsman (FWO) suspects a business of committing underpayment offences, they will be the ones investigating the matter. The Fair Work Ombudsman has the authority to look into suspected criminal underpayment offences and refer suitable cases to the Commonwealth Director of Public Prosecutions (CDPP) or the Australian Federal Police (AFP) for consideration and possible criminal prosecution. The FWO ensures compliance with wage laws and takes enforcement actions when necessary.
 

Conclusion

Now it’s the time to take proactive steps to ensure compliance with the new wage theft laws. You can do so by:  

  1. Reviewing your payroll practices 
  2. Seeking advice from legal professionals
  3. Educating your management team. 

By doing so, you can safeguard your business and demonstrate your commitment to fair employment practices. 

There’s no need for you to navigate this alone. Gain peace of mind knowing your HR functions are managed with precision and expertise. Our experts provide you with best practices for employee classification, leave entitlements, payroll processing and reporting, and other HR matters, helping you avoid common pitfalls. With our experts handling the complexities of HR and payroll management, you can focus on your core business activities, confident that your employees are treated fairly, and your business remains compliant. 

Reach out to us today to learn more about our tailored solutions and how we can assist you in maintaining compliance and fostering a positive workplace culture. 

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