Underpaying your staff is now a criminal offence: what this means for your business
It’s now a criminal offence to intentionally underpay your employees. We recap the new Voluntary Small Business Wage Compliance Code and what it means for your business.
Ensuring Wage Compliance: Understanding the New Voluntary Small Business Wage Compliance Code
Paying employees correctly is a fundamental responsibility of every employer. To strengthen compliance in this area, the Australian Government has introduced the Voluntary Small Business Wage Compliance Code, which makes the intentional underpayment of employees a criminal offence.
This raises important questions: What constitutes underpayment? Are there any exemptions to the new Code?
What is the Voluntary Small Business Wage Compliance Code?
From 1 January 2025, deliberately underpaying an employee’s wages or entitlements may result in criminal charges. While the Code does not apply to honest mistakes—such as accidental payroll errors—it does make it a criminal offence to intentionally underpay an employee.
The Fair Work Ombudsman has the authority to investigate suspected criminal underpayment offences and refer appropriate cases for prosecution. If convicted, an employer may face fines, imprisonment, or both.
What Constitutes Underpayment?
Underpayment may include:
Failing to pay the correct wages, including penalty rates, overtime, and allowances.
Paying less than the amount required by the applicable award or enterprise agreement.
Failing to pay other entitlements, such as superannuation for eligible employees.
Are There Any Exemptions?
There are some limited exemptions under the new Code. In certain cases, the criminal offence provisions will not apply to specific entitlements.
Broadly, the exceptions apply to:
Employees in New South Wales, South Australia, Queensland, Tasmania, and Victoria who are employed by sole traders, partnerships, unincorporated entities, or non-trading corporations.
Most Victorian state government employees.
Tasmanian local government employees.
Understanding Your Obligations
To ensure compliance with the new Code and wage payment requirements, employers should refer to the Guide to Paying Employees Correctly, which provides a comprehensive overview of wage compliance obligations.
If you have concerns about meeting these new requirements or their impact on your payroll processes, please contact our team for further guidance.
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