Big Changes Ahead: New Wage Theft Laws for 2025

When introducing the Fair Work Amendment (Closing Loopholes) Act 2023, the Minister for Workplace Relations stated, ‘If it’s a crime for a worker to steal from the till, it should be a crime for an employer to steal from a worker.’

This amendment to the Fair Work Act 2009 (FW Act) introduces a new criminal offence of wage theft, with maximum penalties reaching millions of dollars and potential prison sentences for individuals. The new offence will apply from 1 January 2025. However, it will also cover ongoing conduct that started before this date.

What do business owners and managers need to know?

The law focuses on two main elements:

1. Payment Obligation: Employers must pay wages, entitlements and superannuation as required by the FW Act or industrial instruments.
2. Intentional Conduct: Failure to meet payment obligations that results in failing to pay these amounts on or before the due date, constitutes wage theft.

For businesses, intent may be assumed if there is a workplace culture that tolerates or enables non-compliance.

How to Stay Compliant

Employers should proactively review their payroll processes, awards, enterprise agreements and employment contracts to ensure employees are paid correctly and on time. 

Australia’s award system is complex. To mitigate risks, it is suggested employers:

• Audit payroll systems: Regular reviews help identify discrepancies early.
• Train payroll and HR staff: Equip your team (especially those responsible for payroll and preparing employment contracts) with up-to-date knowledge of awards, agreements and employment laws.
• Get professional advice: Seek expert guidance if ambiguity arises around compliance obligations.
• Promote compliance culture: Embed practices that prioritise adherence to wage laws.

These laws emphasise the importance of maintaining strong payroll systems and thorough review processes. The new wage theft laws represent a significant move towards safeguarding employee rights and ensuring employer accountability.

Self Reporting and Wage Compliance 

If concerns about potential underpayments arise, employers should consider self-reporting to the Fair Work Ombudsman (FWO). Options to mitigate criminal prosecution include:

1. Voluntary Small Business Wage Compliance Code: Following this code can prevent small businesses from prosecution for non-compliance.
2. Cooperation Agreements: Formal agreements with the FWO can correct issues and preclude legal action.

Exceptions to the Wage Theft Provisions  

The law does not apply to certain payments, including:

• Superannuation contributions
• Payments for long service leave or jury duty leave
• Errors made unintentionally

For small businesses, the focus remains on providing clear pathways to resolve any issues to avoid facing criminal charges.

It is important to note, the laws do not apply to employers who unintentionally underpay their employees or make payment errors by mistake.

For small businesses, there will be a Voluntary Small Business Wage Compliance Code. Compliance with this code means a small business may avoid criminal prosecution if they underpay their employee

Practical Tips for Compliance

To avoid unintentional underpayment, employers can take several proactive steps:

• Stay informed with the latest laws: Regularly review and be aware of the latest employment laws, awards and agreements relevant to your business so your payment practices remain compliant.
• Perform frequent payroll audits: This enables you to identify and resolve any discrepancies early, ensuring all employees are being paid correctly and in accordance with their entitlements.
• Review and update job classifications: Ensure employees are classified under the correct award or agreement. Misclassification can lead to significant underpayments, so it’s crucial to regularly review and update classifications as job roles and responsibilities change.
• Utilise automated payroll systems: Consider using automated payroll systems to reduce the risk of human error as this will assist with accuracy in calculations and timely payments.
• Maintain detailed records: Keep detailed records of hours worked, pay rates and any changes in employment terms. Accurate record-keeping is essential for verifying employees are paid correctly.
• Train your team: Provide ongoing training for HR and payroll staff to ensure they understand the complexities of awards, agreements and legal requirements as knowledge helps prevent mistakes in payroll processing.
• Encourage open communication: Encourage employees to report any discrepancies or concerns about their pay. Open communication can help identify and address issues before they escalate.
• Seek professional advice: When in doubt, consult with professionals to ensure compliance with all relevant laws and regulations as this can be invaluable in navigating complex payroll issues.

By implementing these strategies, employers can significantly reduce the risk of unintentional underpayment and ensure fair compensation for their employees.

The new wage theft laws signal a clear shift toward protecting employee rights and holding employers accountable for intentional underpayment.

1. What’s at stake? Employers face severe penalties, including imprisonment and fines of up to three times the underpayment amount. Employers should also note that wage theft laws are already legislated in some states.
2. Who’s responsible? Decision-makers at all levels, from directors to payroll managers, must ensure compliance.
3. What can businesses do? Employers are encouraged to be proactive and ensure compliance with the new laws – e.g. conducting regular payroll audits, ensure accurate classification of employees, maintain detailed records, and foster a corporate culture that prioritises compliance with wage and entitlements laws. 

Don’t risk financial or reputational damage by ignoring these changes.

Akyra’s experienced HR professionals can assist you in navigating this complex landscape and ensuring your business stays compliant.

Need help ensuring compliance with the new wage theft laws? 

Contact Akyra today for expert HR support tailored to your business needs.

Let’s safeguard your business and foster a culture of compliance.