Wage underpayment laws
From 1 January 2025, intentional underpayment of wages or entitlements is a criminal offence, with sanctions including jail time and significant financial penalties. The ACA urges all members to be vigilant with compliance. The following is an overview of the legislation, potential penalties, and how the ACA can support you in meeting your obligations in relation to pay.
What does the new law cover?
From 2025, employers who intentionally underpay wages, leave entitlements or other benefits, such as superannuation, could face criminal prosecution. This law applies to intentional underpayments and excludes genuine mistakes.
The Fair Work Ombudsman defines ‘intentional conduct’ as:
- taking an action, such as paying less than an employee’s minimum entitlements on purpose. For example, not paying the correct hourly rate or other entitlements such as penalty rates, overtime and allowances
- failing to take an action, such as not paying an employee on purpose.
How can the ACA help?
The ACA Salary Calculator provides architectural practices with a clear process to determine appropriate award-compliant salaries under the Architects Award. The calculator assists members to ensure they are operating legally and fairly, and helps practices to develop properly informed plans for the future of their business.
The ACA Salary Calculator takes into consideration variables such as non-standard hours, superannuation and award categories, as well as the requirements of the National Employment Standards (NES) and the latest version of the Architects Award.
The calculator produces printable outputs suitable for use when employing new staff and for use at staff reviews. It is updated annually to address the outcomes of the national wage review by the Fair Work Commission, superannuation changes and any changes to the award.
The ACA also provides up-to-date pay rates for members.
Who does the new law affect?
The wage underpayment law applies to all employers, whether they are individuals or businesses. Exceptions exist for underpayments related to certain leave types, such as jury duty, emergency services, or long service leave.
What action can the Fair Work Ombudsman take?
The Fair Work Ombudsman outlines the following regarding investigation and possible prosecution:
“We can:
- investigate suspected criminal underpayment offences
- refer suitable matters to the Commonwealth Director of Public Prosecutions or the Australian Federal Police for consideration and possible criminal prosecution.
Prosecution can result in monetary fines, prison time, or both.
Our decision to refer matters for possible criminal prosecution will depend on whether we have enough evidence and whether it’s in the public interest. Our Compliance and Enforcement Policy outlines the factors we will consider in more detail.
The Commonwealth Director of Public Prosecutions and the Australian Federal Police are the only bodies that can initiate legal proceedings for a criminal offence.”
What are the potential penalties?
If a person is convicted of a criminal offence related to wage underpayment, a court may impose a maximum of 10 years in prison for an individual. They can also impose significant penalties for the individual or a business, or both.
Maximum penalties for a business are either three times the value of the underpayment or a set penalty amount up to $8,250,000. Maximum penalties for an individual are either three times the underpayment amount or a set penalty amount up to $1,650,000.
How can small business employers protect themselves from criminal prosecution?
The Fair Work Ombudsman provides guidance to small business employers with the new Voluntary Small Business Wage Compliance Code.
A guide to paying employees correctly outlines the steps to ensure compliance with the Fair Work Act, the consequences of underpaying employees, and how to access protections under the Code to avoid criminal prosecution for unintentional underpayments. It also provides a checklist for ensuring correct payment, record-keeping, staying updated with workplace laws, and fixing any issues promptly.
What changes will take effect in February 2024 related to civil penalties and contravention of workplace laws?
From 27 February 2024, penalties for serious contraventions of workplace laws have been significantly increased. These changes include: doubling the maximum penalty for non-compliance with a compliance notice; and increasing the maximum penalty by five times for ‘selected civil remedy contraventions’ by a business with 15 or more employees.
The threshold for a “serious contravention” has also been lowered from requiring both “knowing and systematic” breaches to allowing cases where the breach was “knowing or reckless”.
Where can I learn more?
For more details on the new legislation and the Voluntary Small Business Wage Compliance Code, visit the Fair Work Ombudsman’s website.