Written by: Hugo Morris
A major shake-up to Australia’s workplace laws came into effect on 1 January 2025, making it a criminal offence for employers to deliberately underpay workers. This shift is part of a broader suite of reforms introduced by the Fair Work Legislation Amendment (Closing Loopholes) Acts.
With increased scrutiny and harsher consequences, businesses of all sizes must act now to ensure compliance with pay obligations. Keep reading to learn more about the reform.
It’s a Criminal Offence to Deliberately Underpay Employees
Under the new regime, it is a criminal offence for an employer to intentionally fail to pay an employee what they are legally entitled to. This includes payments required under:
- The Fair Work Act 2009 (Cth),
- Modern awards,
- Enterprise agreements, or
- Other applicable industrial instruments.
To be prosecuted, there must be intentional conduct. Honest mistakes, payroll errors, or accidental miscalculations will not trigger the offence.
What Are the Penalties?
The consequences for intentionally underpaying an employee are severe. Penalties are outlined for both individuals and companies.
- Individuals can face up to 10 years’ imprisonment, fines of up to $1,565,000, or both.
- Companies can be fined up to $7,825,000, the exact amount will depend on the seriousness of the offence and the amount underpaid.
In some cases, the Fair Work Ombudsman (FWO) may offer to enter into a cooperation agreement with an employer to avoid criminal referral.
What Should Employers Be Doing Now?
All employers, regardless of size or industry, should take immediate steps to ensure they are paying employees correctly. Employers should adhere to the following steps.
Award and Agreement Review
Confirm which industrial instruments apply to your workforce. If there’s any uncertainty, seek legal advice.
Job Classification Check
Ensure all roles are properly classified in line with the applicable award or agreement.
Payroll Audit
Conduct a full review of your payroll systems and processes to ensure compliance with pay rates, overtime, penalties, and other entitlements.
What About Small Businesses?
For small business employers, following the Voluntary Small Business Wage Compliance Code is the bare minimum. While not a legal shield, it may reduce the risk of referral to prosecuting authorities.
Civil Penalties Still Apply for Mistakes
Importantly, the reforms also increase civil penalties for underpayments, particularly for larger employers. These civil penalties do not require intent. Even where an underpayment was unintentional, employers may face serious financial consequences.
If you’re unsure about your obligations or need help auditing your current systems, get in touch with our employment law team over the phone on (07) 5444 1022. We’re here to help you navigate the changes and avoid potentially devastating consequences.
Disclaimer:
The information contained in this article is for general informational purposes only and is not intended to provide legal advice or substitute for the advice of a professional. This information does not consider your personal circumstances and may not reflect the most current legal developments. Should you need advice, please contact our Sunshine Coast legal firm for targeted information relating to personal your situation.
Greenhalgh Pickard’s Employment Law Team
