Worried about a wage underpayment issue? You should be.

Worried about a wage underpayment issue? You should be.

If your HR systems aren’t watertight, your business could be at risk of serious legal and financial consequences due to new wage theft laws that came in to effect on the 1st January 2025.


What is criminal wage theft?

Wage theft occurs when employers fail to pay employees their legal entitlements under Australia’s workplace relations system. Employers (bodies corporate or individuals) can now be criminally liable for intentionally underpaying their workers. This includes certain employee entitlements under the Fair Work Act 2009 (Cth) or a fair work legislative instrument, such as a modern award or enterprise agreement.


It can include;

  • Underpayment of salaries

  • Superannuation shortfalls

  • Unpaid penalty rates, shift allowances, or overtime

  • Missing rostered days off

  • Unpaid breaks

  • Unauthorised deductions


The Consequences of Wage Theft

The penalties for wage theft are severe:

  • Up to 10 years in prison for individuals

  • Fines up to $1.65 million for individuals

  • Fines up to $8.25 million for companies

  • A fine equal to three times the amount of the underpayment


Why Do Underpayments Happen?

One of the biggest challenges in preventing wage theft is Australia’s complex award system. With multiple pay rates, superannuation requirements, overtime allowances, and other entitlements, even well intentioned employers can make costly mistakes.

Key reasons for underpayments include:

  • Complex industrial relations laws: Many businesses struggle to navigate the intricate award system.

  • Inexperienced payroll teams: A lack of expertise can lead to errors.

  • Insufficient HR resources: Small teams may not have the capacity to manage compliance effectively.


Factors That May Affect Prosecution

Not all payroll errors result in prosecution. The government considers:

  • Intentional misconduct vs. honest mistakes: Accidental errors are less likely to be prosecuted.

  • Cooperation agreements: Employers who self report underpayments and work with the Fair Work Ombudsman (FWO) may receive more lenient treatment.

  • Employee circumstances: Factors such as classification, qualifications, hours, and location can impact legal outcomes.


How to Prevent Wage Theft & Ensure Compliance

To avoid underpayments and protect your business, take proactive steps:

  • Conduct regular payroll audits

  • Seek professional advice

  • Maintain accurate records

  • Educate your payroll and HR teams


Final Thoughts

With increasing scrutiny on wage compliance, businesses should be working to prevent underpayments and mitigate risk. Given the potential for criminal charges and multi-million dollar fines, ensuring payroll compliance should be a top priority. Find out how using a specialist HR recruiter like Samuels Donegan can help you mitigate the risk of costly reputational damage or worse.

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