What employers and payroll managers need to know about Australia’s new wage theft laws

On 1 January 2025, Australia introduced landmark legislation aimed at tackling the intentional underpayment of wages, commonly referred to as wage theft. This new legal framework elevates the seriousness of wage underpayment, sending a strong message to businesses that deliberate non-compliance will no longer be tolerated. Employers and payroll managers need to understand the implications of these laws to ensure their payroll practices remain compliant and their organisations avoid the severe consequences of non-compliance.

What are the key features of the new laws?

The wage theft laws make the deliberate underpayment of wages a criminal offence in certain circumstances. While specific details may vary by jurisdiction, the core aspects include:

• Criminalisation of intentional underpayment: Employers found to have deliberately underpaid employees can face criminal charges, including fines and potential imprisonment for individuals responsible.
• Clear definitions of wage theft: The laws define wage theft as the intentional failure to pay wages, superannuation, entitlements, or penalty rates in accordance with industrial agreements or legal requirements.
• Increased penalties: Organisations found guilty of wage theft may face significant fines, and individuals—such as directors or payroll managers—could face personal liability.
• Enhanced enforcement powers: Government bodies such as the Fair Work Ombudsman and state regulators now have greater resources and authority to investigate claims of wage theft.
• Stronger protections for employees: Workers who come forward with wage theft claims are protected from retaliation or unfair dismissal under the new laws.

Who is affected?

These laws apply to all employers operating in Australia, regardless of size or industry. However, payroll managers and business owners should note that intentional underpayment must be proven to trigger criminal charges. Accidental errors, while still a compliance issue, will not generally result in criminal penalties unless there is evidence of wilful misconduct.

The risks of non-compliance

The penalties for wage theft are severe and reflect the gravity of the offence. Companies may face fines in the millions of dollars, while individuals found guilty can face up to ten years in prison, depending on the jurisdiction.

Beyond the financial and legal repercussions, the reputational damage caused by a wage theft conviction can be devastating. Organisations risk losing the trust of employees, customers, and stakeholders, which can take years to rebuild.

What payroll managers need to do now

With the introduction of these laws, payroll managers have a critical role to play in protecting their organisations from non-compliance. The following steps can help ensure your payroll processes are compliant:

1. Conduct a payroll audit: Regularly review your payroll systems, processes, and employee records to ensure all entitlements are being paid correctly. Identify and rectify any discrepancies promptly.
2. Review employee agreements: Ensure that all employment contracts, enterprise agreements, and award interpretations are up-to-date and correctly applied. Misinterpretations of awards are a common cause of underpayment issues.
3. Invest in payroll training: Payroll professionals should have up-to-date knowledge of relevant laws, awards, and industrial instruments. Consider investing in formal payroll qualifications for your team to strengthen compliance.
4. Automate payroll processes: Modern payroll software can help reduce the risk of errors by automating calculations for wages, tax, and superannuation. Ensure your software is updated regularly to reflect legal changes.
5. Document everything: Maintain clear records of employee hours, entitlements, and payments. In the event of a compliance audit or investigation, detailed documentation is crucial.
6. Seek professional advice: If you are uncertain about your compliance status, engage a payroll consultant or employment lawyer to review your processes and provide expert guidance.

 Avoiding common mistakes

Even if wage underpayment is unintentional, it can still result in costly back payments and penalties. Common payroll errors to watch for include:

• Misinterpreting modern awards or enterprise agreements
• Incorrectly classifying employees as independent contractors
• Failing to update pay rates in line with legislative changes or award updates
• Miscalculating leave entitlements or penalty rates
• Overlooking superannuation obligations for part-time or casual employees

Why compliance matters

While the majority of payroll errors stem from genuine mistakes, the introduction of criminal penalties underscores the importance of payroll compliance. Payroll is no longer seen as an administrative function; it is a critical business process that must be handled with care and expertise.

The new wage theft laws are an opportunity for organisations to strengthen their payroll systems and demonstrate their commitment to fair treatment of employees. By investing in compliance, employers can mitigate risks, protect their reputation, and foster a culture of trust and accountability within their workforce.

Final thoughts

The wage theft laws introduced on 1 January 2025 mark a turning point for payroll compliance in Australia. Employers and payroll managers must take these changes seriously and prioritise proactive measures to prevent underpayment.

If your organisation has any doubts about its compliance, now is the time to act. Remember, ignorance of the law is not a defence, and the consequences of non-compliance can be severe. A well-trained payroll team, robust systems, and a commitment to ethical practices are the best safeguards against wage theft and its repercussions.

For employers and payroll managers, ensuring compliance with the new laws is not just a legal requirement—it is an investment in the long-term success of your organisation.