From 1 January 2025, intentionally underpaying an employee’s wages or entitlements can constitute a criminal offence under the Fair Work Act 2009 (Cth) (FW Act), provided the action was intentional and not an honest mistake.
The Fair Work Ombudsman (FWO) investigates suspected criminal underpayment offences and will refer suitable matters for criminal prosecution.
Criminal offence
An employer might commit a criminal offence if they:
- Were required to pay an amount to an employee such as wages or paid leave entitlements, or on behalf of the employee, such as superannuation; and
- Intentionally did something that resulted in these amounts not being paid on or before the due date.
For a company the maximum fine will be the higher of 3 times the amount of the underpayment or $8.25 million.
If an individual is convicted of a criminal offence, a court can impose a maximum of ten years in prison, a fine or both.
Exceptions
Cooperation agreements
If an employer has voluntarily informed the FWO about their conduct that could be a criminal offence they can seek to enter into a written cooperation agreement. The FWO will not refer any conduct in that agreement for criminal prosecution. This does not prevent the FWO from taking other enforcement action.
Voluntary small business wage compliance code
A small business employer is an employer with less than 15 employees. They cannot be referred for criminal prosecution if they have underpaid an employee so long as they have complied with the Voluntary Small Business Wage Compliance Code. This does not prevent the FWO from taking other enforcement action.
What you can do now
To prepare for these changes, businesses should take proactive steps to:
Ensure compliance – Stay updated on employment laws and awards relevant to your business to ensure your payment operations remain compliant.
Maintain records – Keep comprehensive employee records of pay and hours worked. This practice facilitates transparent reviews and it is a legal requirement under the FW Act to retain these records for seven years.
Conduct audits – Regularly audit your payroll processes, review employee classifications, and accurately document working hours. This proactive approach enables you to identify and rectify discrepancies before they become significant issues.
Compliance Code – Small business employers should familiarise themselves with the Voluntary Small Business Wage Compliance Code.
Seek professional advice – To find out more and ensure your obligations are met, and your business is protected, contact the team at Emplawyer for expert guidance.
