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The Criminalisation of Wage Theft in Australia

Some of Australia's largest employers and institutions have been criticised for large-scale underpayments, which have cost employees tens of millions of dollars.

According to international professional services firm PwC, Australian workers' underpayments amount to as much as $1.35 billion annually.

4mins

Posted 05/12/2024

There is a systemic, sustained, and shameful wage theft problem in Australia, and the lack of robust legislation to protect workers only exacerbates this problem.

The criminalisation of wage theft is part of the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023, passed on 7 December 2023, splitting the government's omnibus industrial relations bill into two. The Bill received Royal Assent on 14 December 2023. More information on the Closing Loopholes can be found on the Fair Work website.

The criminalisation of intentional underpayments of wages

Under the revisions to employment legislation, intentional underpayment of wages or deliberate underpayments has been redefined as a criminal offence. Starting 1 January 2025, employers deliberately paying their workers dishonestly face legal repercussions. This significant shift in the law protects employees from unscrupulous practices and ensures workplace fairness, conveying that underpaying workers is no longer tolerated. This move marks a positive step towards safeguarding workers' rights and holding employers accountable for their actions.

Wage theft criminalisation - key takeaways

  1. Intentionally underpaying employees becomes a criminal offence on 1 July 2024.
  2. It is an offence to intentionally underpay employees less than they are legally entitled to, and employers must adhere to workplace laws.
  3. Employers can experience financial hardship due to criminal penalties for underpayments of wages, including unpaid superannuation.
  4. Employers will be held accountable for their actions by criminalising intentional underpayments of wages.
  5. A fine, legal action and reputational damage to the employer may result from intentional underpayment of wages.
  6. Employers guilty of intentional underpayment may be required to back pay their employees the amount they are owed, plus any additional damages.
  7. Intentional underpaying of wages being criminalised means employees will receive compensation and be treated fairly.

What is wage theft in Australia?

Wage theft is the act of employers underpaying their workers or failing to provide them with the wages and entitlements they are legally owed. It can take many forms, including paying below the minimum wage and not paying overtime rates.

A company can be charged with wage theft if it underpays employees or pays employees with dishonest intent.

How to ensure you pay your employees correctly

You can take steps to mitigate payment errors and calculations, including checking your payroll calculations, especially if you need to make manual adjustments.

Additionally, ensure employees clearly understand their pay rate, bonuses, entitlements, and overtime policies. Also, ensure you keep accurate records of employee payments.

  1. Check your payroll software set-up and calculations to see if entitlements are correctly paid, including accrued.
  2. Seek advice quarterly/annually to ensure your employees are paid and classified correctly.
  3. Maintain compliance with legislative overtime requirements when paying your employees.
  4. Conduct regular payroll audits.
  5. Ensure superannuation contributions are calculated correctly.
  6. Maintain accurate records of employee entitlements.
  7. Implement annual salary review initiatives.

In Australia, wage theft penalties are imposed on employers who deliberately underpay their employees. However, unintentional errors or mistakes can still lead to penalties, so employers must ensure they accurately calculate and pay their employees the correct wages.

New criminal laws targeting unethical practices may deter employers from exploiting their employees. This is vital in safeguarding workers' rights and well-being across various sectors.

Criminalising wage theft protects employees' rights, ensures fairness, deters employers from exploiting vulnerable workers, and holds offenders accountable for their actions.

The Fair Work Commission provides information and empowerment to navigate work-related issues and safeguards employees' interests by promoting fairness and transparency in the workplace.

The criminalisation of wage theft signals a new era of accountability for businesses. Severe penalties will be imposed for those who don't meet their legal obligations. However, some business groups are concerned that the legislation may result in an overly punitive environment.

The Fair Work website provides step-by-step instructions for businesses to follow on how to fix an underpayment.

Businesses must ensure that errors in payroll processing are minimised and not repeated by conducting regular payroll setup checks and carefully managing manual data entry and calculations.

Employers can reduce wage theft risks by investing in a payroll solution as part of an all-in-one workforce management platform.

Conduct payroll audits regularly to ensure compliance with regulations and accurate financial records. These audits can be simple checking exercises or more involved audits that compare source data against pay runs and payments.

The Fair Work Act protects workers from wage theft and other forms of exploitation. Therefore, Fair Work must increase its efforts in investigating complaints, conducting audits, and enforcing penalties on businesses found guilty of engaging in it.

Despite the criminalisation of wage theft, there are concerns about the effectiveness of enforcement. Employees must be empowered to come forward, and enforcement agencies need the resources and legal authority to hold employers accountable.

The criminalisation of wage theft in Australia marks a watershed moment in the fight for workers' rights. The new laws have severe penalties for employees and employers.

To understand the Criminalisation of Wage Theft in Australia, download our Comprehensive Guide.

In this guide, we cover: 

  • The criminalisation of intentional underpayments of wages
  • What is Wage Theft?
  • How to ensure you pay your employees correctly
  • The Impact on Employees and Employers
  • Types of Wage Theft
  • Fixing underpayments
  • The Fair Work Act
  • Enforcement Challenges