“The criminalisation of wage theft from January 2025 will be a wake-up call for all Australian businesses. While deliberate underpayment has rightly drawn scrutiny, our research reveals that accidental payroll errors are alarmingly common, affecting nearly 60% of companies in the past two years.
Matt Loop, VP and Head of Asia at Rippling
Starting January 1, 2025, Australia’s workplace compliance landscape will change dramatically. Employers who deliberately underpay employees could face fines as high as AU$8.25 million or up to 10 years in prison under new amendments to the Fair Work Act 2009 (Cth) introduced by the Closing Loopholes Act 2023.
This landmark shift aligns wage theft penalties with other serious criminal offenses, ushering in unprecedented consequences for corporate executives and business owners who fail to comply.
Who’s affected?
The new rules target employers who intentionally underpay employees under modern awards or enterprise agreements, including entitlements like superannuation. Those responsible, from CEOs to payroll managers, could face criminal prosecution if found guilty of knowingly causing or allowing underpayments.
Key Penalties at a Glance:
- Imprisonment: Up to 10 years for intentional wage theft.
- Fines: Up to AU$7.8 million for companies and AU$1.65 million for individuals.
- Repeat Offenders Beware: Courts can impose fines of three times the underpayment amount, making non-compliance financially crippling.
Safe Harbors for Compliance
To ease the transition for employers, particularly small businesses, the law introduces “safe harbor” protections:
- Voluntary Small Business Wage Compliance Code: A defense mechanism for small employers who comply with specific standards.
- Cooperation Agreements: Larger businesses can avoid criminal prosecution by self-reporting wage discrepancies to the Fair Work Ombudsman (FWO) and committing to compliance.
What’s driving this reform?
These laws come after years of high-profile wage theft scandals and litigation, with AU$21 million in penalties issued in 2023-24 alone. Cases like Sushi Bay (AU$15.3 million in fines) and Foot & Thai Massage (AU$966,890 in penalties) illustrate the judiciary’s increasing willingness to impose severe consequences for exploitation of vulnerable workers, especially migrants and young employees.
Steps Employers Must Take Now:
- Audit Pay Practices: Ensure employee classifications, payroll systems, and entitlements align with legal standards.
- Rectify Anomalies: Address any underpayments immediately to avoid criminal liability.
- Prepare for Penalty Rates: With the holiday season ahead, ensure correct payment of penalty and overtime rates.
- Update Training: Educate decision-makers and managers about the new laws and their responsibilities.
- Stay Informed: Monitor developments in the Small Business Code and seek legal advice as needed.
What’s next?
As enforcement begins, the Fair Work Ombudsman is expected to prioritize vulnerable worker protection, with criminal referrals to the Director of Public Prosecutions (DPP) likely. Employers must act decisively to ensure compliance, as ignorance or unintentional errors won’t shield them from civil or criminal consequences.
Matt Loop, VP and Head of Asia at Rippling, says: “The criminalisation of wage theft from January 2025 will be a wake-up call for all Australian businesses. While deliberate underpayment has rightly drawn scrutiny, our research reveals that accidental payroll errors are alarmingly common, affecting nearly 60% of companies in the past two years.
Adding to the challenge, many SMEs still rely on fragmented, siloed systems to manage payroll. This not only complicates operations but significantly increases the risk of errors— heightening the potential for non-compliance under the new laws.
The urgency for businesses to modernise their approach cannot be overstated. Technology offers a practical solution, helping to streamline and automate processes, reduce human error, and ensure compliance. But this is about more than just avoiding penalties. Accurate and timely pay builds trust with employees, strengthens workplace morale, and fosters accountability.”
The message is clear: wage theft isn’t just a financial risk anymore—it’s a criminal offense. Now is the time to ensure your business complies with Australia’s new workplace laws.
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