Upcoming Criminalisation of Wage Underpayments: What Small Businesses Need to Know
Starting January 2025, Australia will criminalise the underpayment of employees, marking a significant shift in workplace laws and employer responsibilities. Wage underpayment is a real concern in Australia, with the Fair Work Ombudsman stepping in to help over 250,000 underpaid workers reclaim their earnings in the last financial year. With a commitment to fostering a culture of accountability, these new regulations urge Australian businesses to prioritise compliance. At Small Business HR Support, I aim to guide you through these upcoming changes, ensuring your business remains compliant and avoids potential legal pitfalls.
Understanding the Criminalisation of Wage Underpayments
Under the new laws, intentional underpayment of wages by employers will be classified as a criminal offence. This means that if an employer is required to pay specific amounts to an employee—such as wages or superannuation contributions—under the Fair Work Act or an industrial instrument, and they intentionally fail to do so, they could face criminal charges. This is an initiative by the government to ensure fair pay practices and safeguard employee rights.
The Implications for Small Businesses
To help mitigate these risks for small businesses, the government is developing a Voluntary Small Business Wage Compliance Code (Voluntary Code). While still in the works, this code will offer a safety net for small businesses. Compliance with the Voluntary Code means that if a business inadvertently underpays its employees, it will not face criminal prosecution. This initiative aims to provide clarity and support, helping small businesses navigate the complexities of wage compliance.
Stay tuned for more information on the Voluntary Code as it becomes available. I will continue to update you with the latest developments and operational specifics to ensure your business can take advantage of this safeguard.
Common Causes of Wage Underpayment
Wage underpayment can occur for various reasons, often due to mistakes or payroll errors. Here are some common issues to watch out for:
Incorrect Classification or Award Rates: Misclassifying an employee or using the wrong award rates is a frequent cause of underpayment.
Improper Overtime Payments: Not paying overtime correctly or at all can lead to significant underpayments.
Unpaid Work Hours: Failing to pay employees for all their hours worked, including mandatory training or work done outside regular hours.
Incorrect Handling of Meal Breaks: Issues with split shifts and not providing the correct meal breaks can result in overtime pay discrepancies.
Minimum Shift Requirements: Not engaging or paying employees their minimum shift requirements as outlined by their award or agreement.
Taking Action
Prioritising wage compliance is now more crucial than ever. To ensure your business adheres to the new regulations and avoids potential criminal charges, consider the following steps:
Review and Update Payroll Systems: Regularly audit your payroll systems to ensure accurate classification and payment of employees.
Educate and Train Staff: Ensure your management team and payroll staff are well-versed in the relevant awards and entitlements.
Monitor Legislative Updates: Stay informed about changes in employment laws and the implementation of the Voluntary Code.
For personalised guidance on navigating these evolving employment regulations and ensuring compliance, don't hesitate to reach out. My goal is to help your business thrive while maintaining fair and lawful employment practices. Stay ahead of the curve and protect your business from the serious consequences of wage underpayment.
