Criminalising Intentional Wage Underpayments

These changes came into effect on 1 January 2025

From 1 January 2025, intentional underpayment of wages or entitlements can be a criminal offence. This doesn’t include honest mistakes.

An employer may commit a criminal offence where they:

– were required to pay an amount:

• to an employee such as wages or paid leave entitlements
• on behalf of the employee, or for their benefit, such as superannuation or a salary sacrifice arrangement

– have intentionally done something that intentionally results in those amounts not being paid on or before the day they were due.

The offence only applies to intentional underpayments that happen after these provisions take effect. This includes where they’re part of a course of conduct that started before the provisions take effect.

An employer can be an individual or a company.

The Fair Work Ombudsman (FWO) 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.

The Fair Work Ombudsman’s decision to refer matters for possible criminal prosecution will depend on whether they have enough evidence and whether it’s in the public interest. You can read the Compliance and Enforcement Policy Compliance and Enforcement Policy which outlines the factors that will be considered 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.

Exceptions

These provisions don’t apply to certain employees for:

• superannuation contributions
• payment for taking long service leave payments
• payment for taking leave connected with being the victim of a crime
• payment for taking jury duty leave or for emergency services duties.

Find out more at Criminal prosecution, including the penalties that may apply and exception rules.

Cooperation Agreements

An employer who has voluntarily told the FWO about their conduct that could be a criminal offence can seek to enter into a written cooperation agreement with the FWO. This prevents referring any conduct specified in that agreement for possible criminal prosecution. However, the FWO may still take other enforcement action, such as starting Litigation.

Learn more about cooperation agreements, including when and how they’re used and how to apply for one at Cooperation agreements.

Voluntary Small Business Wage Compliance Code

A Voluntary Small Business Wage Compliance Code (Code) has been established.

A small business employer can’t be referred for criminal prosecution by the FWO if:

• they’ve underpaid an employee
• the FWO is satisfied that they’ve complied with the Code.

Learn more and download the Code at Voluntary Small Business Wage Compliance Code.

Civil Penalties for Wage Underpayments

The new laws from 1 January 2025 increase the maximum penalty for a contravention related to an underpayment for a non-small business employer.

The new laws will mean that this maximum penalty can (in certain circumstances) be the greater of:

• 3 times the value of the underpayment
• the relevant penalty unit amount for the contravention.

Find out more at Litigation.

These are just a few of the reasons why having a bookkeeper is essential! Stay up to date, compliant, and avoid costly mistakes!

Not sure where to start?

Get in touch below: