Wage Theft Becomes a Criminal Offence in January - Is Your Business Prepared?

From 1 January 2025, it becomes a criminal offence to underpay wages or entitlements owed to employees.

Whether you have concerns about how you pay your employees or you are confident everything is above board, we recommend all organisations of all sizes, even those with dedicated payroll compliance teams, urgently undertake a review of their payroll practices, conducted by an independent third party.

Why? Because a fresh set of eyes is perfectly positioned to identify gaps, errors and potential risks before they end up costing thousands in backpayments, fines and reputational damage.

To save future headaches, we’ve also created a comprehensive “Preparing Payroll for Wage Theft Laws Checklist” so you can review your practices and mitigate risk.

1. What is Wage Theft?

Wage theft occurs when an employer does not pay a worker their correct wages or entitlements in accordance with their relevant award, registered agreement and/or legislation.

This could mean:

• paying a worker a lower rate than they should be paid;
• withholding overtime payments, and not paying penalty rates;
• not paying appropriate allowances;
• paying a flat rate or salary that does not cover what the employee would earn under the award;
• paying the employee at the incorrect award classification;
• failing to make?superannuation contributions;
• deducting money from wages unlawfully;
• not offering the correct annual leave entitlements;
• not paying appropriate meal break or travel entitlements.

Wage theft can occur both intentionally and unintentionally (by employers making honest mistakes), with wage theft only considered a criminal offence if it is found to be occurring deliberately.

2. How Does it Happen?

Errors result in both underpayments and overpayments and, unfortunately, both can be costly for business. Errors are often caused by:

• Human / data entry error;
• Incorrect system setup;
• Inexperienced or unqualified individuals attempting to interpret Awards and/or run payroll;
• Misinterpreting Award provisions (for example classifications, ordinary span of hours, overtime rates, penalties, travel and allowances);
• Multiple Awards applying to different employees within one employer;
• Inadequate pre-processing approvals;
• Issuing an Individual Flexibility Arrangement that does not meet the relevant award entitlements;
• Failing to monitor work hours, changes to roster patterns and different allowances;
• Payroll program being incapable of handling different payroll items;
• Inadequate monitoring and auditing.

Often underpayments occur by several of these issues happening over a period of time. A snowball effect occurs and someone eventually realises the (expensive) problem.

3. What Are the Consequences?

Underpayments often happen because of a mistake or payroll error. Fixing it quickly and getting it right in future is important.

Not following the law can lead to serious penalties. Under the national wage theft legislation, the following penalties for a company will apply:

• if the court can determine the underpayment, the greater of 3 times the amount of the underpayment and $7.825 million, or
• if the court can’t determine the underpayment, $7.825 million.

For an individual, the fowling penalties will apply:

• maximum of 10 years in prison;
• if the court can determine the underpayment, the greater of 3 times the amount of the underpayment and $1.565 million, or
• if the court can’t determine the underpayment, $1.565 million.

In determining penalties, the court will also look at the organisations culture around compliance (or lack thereof). Where there is deliberate wage theft with leaders/HR/payroll who knowingly engage in the conduct without making genuine efforts to improve it, we expect the harshest penalties and reputational damage for both individuals and organisations.

4. Case Studies

There are plenty of examples where large organisations have got it wrong in recent years, including names such as Coles, Subway, Super Retail Group, Qantas, Maurice Blackburn (yes, lawyers get it wrong too!), 7 Eleven, Grill’d and George Calombaris.

You can read a summary of these cases and more here.

Note that this article was published by Employment Hero – we do not have any affiliation with them.

5. How to Protect Your Business

As you are now aware, not meeting your obligations as an employer is a serious and very real issue.

Don’t forget that one of the significant changes is the expectation for employers to hold a positive corporate compliance culture. That is, one where leaders, executives, HR and payroll continuously monitor compliance, actively promote doing the right thing and follow through with moral and ethical conduct. If this is a gap for your company currently, please reach out to the team at Edwards HR to discuss how we can assist.

We’ve created a comprehensive “Preparing Payroll for Wage Theft Laws checklist” so you can review, mitigate risk and save future headaches.

6. Looking for Help?

While paying employees correctly can be a complicated and daunting task, and the fact that?employers can be liable for not holding a positive corporate compliance culture,?the good news is that there is help out there.

The team at Edwards HR advises every week on award coverage, minimum entitlements, calculating salaries and flat rates, drafting employment contracts and Individual Flexible Arrangements (IFAs) against various award provisions.

We also complete many projects relating to auditing, payroll system setups and testing, and remuneration benchmarking.

If you would like to chat with our team about wage compliance, auditing and commercial protection initiatives that are both cost effective and tailored specifically to your business, please contact our team on 07 3568 0866.

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