INDUSTRIAL RELATIONS (IR) COMPLIANCE CHECKLIST

With new ‘wage theft’ legislation brought into effect under the Fair Work Legislation Amendment (Closing Loopholes) Act 2023, intentionally underpaying employees from 1 January 2025 has the potential to be a criminal offence.

This will require organisations to risk-assess internal processes that are in place, to ensure that they are operating in compliance with these new laws. These assessments will from a workplace culture perspective, will drive improved governance, focus and accountability across organisations when it comes to people related decision making.

What are the new wage theft laws?

The new laws, effective from 1 January 2025, will make intentional underpayment of wages by employers a criminal offence, with significant new civil and criminal penalties introduced.

The penalties act as a significant deterrent, as they have the capacity to directly impact individuals in the organisation, including fines of $7.825 million for a company or $1.565 million for an individual, and up to a maximum of 10 years imprisonment for an individual found to be in contravention (excluding small business employers).

Small business employers are those defined as having 15 or less employees and will be subject to the Voluntary Small Business Compliance Code, that can be found here.

What is wage theft?

Wage theft is a term used to describe underpayment of wages owed to employees, particularly where the underpayment is deliberate or intentional on behalf of the employer.

What makes wage theft intentional?

These new wage theft laws are only intended to cover employers who are deliberately underpaying employees. The intention is not to cover employers who pay incorrect amounts by honest mistake, or unintentionally underpay employees.

Penalties, including the individual criminal penalties outlined above, will be considered when an employer commits an offence by:

• Not paying the required amount to an employee (ie: salary or wages), under the Fair Work Act 2009, or an industrial instrument (ie: award or enterprise agreement); and/or

• Intentionally engaging in conduct that results in a failure to pay those amounts to the employee, on or before the day the payment is due to be paid.

The risk profile of wage payments has changed Payment of wages has traditionally in organisations been a lower-priority focus, generally understood to be an administrative or operational function. The function that carries out this activity, is generally Payroll, that features in the structure of many organisations as embedded in
Human Resources (HR), Finance or Office Administration.

The payment of wages has always been complex and costly, given that salaries and wages are generally one of the highest overheads of an organisation. The payroll function is often overlooked in terms of the importance it has on the performance of the organisation.