The Fair Work Legislation Amendment (Closing Loopholes) Act 2023 has introduced a major change to Australia’s employment law: the criminalisation of wage theft. Employers who intentionally underpay workers now face the risk of severe penalties, including imprisonment. Understanding these changes is crucial to ensuring compliance and avoiding legal consequences.
What Are the Penalties?
The penalties for intentional wage underpayment are severe and designed to deter non-compliance:
- Up to 10 years’ imprisonment.
- Fines of the greater of:
- Three times the amount of the underpayment, if the court can determine that amount; or
- the relevant penalty unit amount for the contravention (a penalty unit is a set monetary value used to calculate fines for breaches of legislation.)
What Employers Need to Do to Avoid Penalties
While the law is strict, it does not penalise employers for honest mistakes or payroll miscalculations. However, businesses must take proactive steps to ensure compliance:
- Conduct Regular Payroll Audits – Review payroll systems to ensure employees are paid correctly, including wages, overtime, and superannuation.
- Stay Updated on Employment Laws – Keep up with changes to modern awards, enterprise agreements, and Fair Work Act requirements.
- Maintain Accurate Records – Ensure all payment records are correct and easily accessible in case of an audit.
- Seek Advice – If unsure about payment obligations, consult a HR professional.
- Address Underpayments Immediately – If an underpayment is discovered, rectify it promptly to avoid potential legal action.
What If an Employer Realises They Have Underpaid Workers?
The law provides reassurance for small businesses that may have inadvertently underpaid employees and are actively trying to correct the issue. Employers who self-report underpayments to the Fair Work Ombudsman may enter into a cooperation agreement, preventing prosecution. The FWO will consider factors such as the nature of the offence and the level of cooperation before entering into an agreement.
The introduction of criminal penalties for wage underpayment signals a significant shift in Australia’s workplace laws. Employers must act now to review their payroll practices, ensure compliance, and avoid the risk of criminal prosecution. By staying informed and proactive, businesses can protect themselves from severe penalties while maintaining fair and lawful workplace practices.
Navigating complex wage laws and compliance requirements can be challenging. ProcessWorx provides expert HR support to help businesses stay compliant, avoid costly penalties, and implement best-practice payroll and record-keeping systems. Our team can assist with wage audits, employment contracts, and ongoing HR advice to ensure your business operates smoothly and legally.
If you would like to learn how ProcessWorx can help with Human Resources or Work Health & Safety, please contact us on 08 9316 9896, enquiries@processworx.com.au. Also watch an Introduction to ProcessWorx.
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