Did you know that from 1 January 2025, if an employer intentionally underpays an employee, they can be subject to criminal prosecution? Underpayment may include:
- not paying sufficient wages, including penalty rates, overtime rates and allowances (or not paying them at all)
- not paying amounts required by the applicable award or enterprise agreement
- not paying other entitlements, for example superannuation for some employees.
Intentional conduct includes:
- taking an action, such as purposefully paying less than an employee’s minimum entitlements
- failing to take an action, like purposefully not paying an employee at all.
If a person is convicted of a criminal offence, a court may impose a maximum of 10 years in prison for an individual. They can also impose significant penalties for the individual or a company, or both.
The criminal offence does not apply for underpayments that happen because of a genuine mistake. It’s not just the business owners who can be prosecuted for criminal underpayments. Other people involved in an underpayment can also be held criminally responsible too. This could include, for example, payroll managers or accountants in the business where their conduct contributed to intentional underpayment.
Small businesses (employers who have less than 15 employees) commit the criminal offence for intentionally underpaying an employee if:
- they’re required to pay an amount to an employee, such as wages or super
- they fail to pay the amount in full on or before the day they’re due to be paid
- they intentionally engage in conduct with the intent that it results in those amounts
not being paid.
Need to understand more? Don’t worry we’ve got you covered, join us for our free webinar on All you Need to Know — Wage and Superannuation Compliance on 6 Feb 2025 at 10:30am to 11:30am — Register here
What do I need to do?
Here are some actions that employers can take now:
- Contact our Business Advice Hotline on (08) 8300 0000 (select option 1) and get advice.
- Check your payroll and human resources systems to identify whether you are correctly calculating wages and superannuation payments.
- Review your internal policies regularly and don’t assume it’s okay because you “pay over Award” without proper evidence.
- Undertake a Payroll and Policy Audit – now is the time to act. Our industrial relations experts can assist you with this.
- For small business, familiarise yourself with the Voluntary Small Business Wage Compliance Code (we will talk about this in our webinar) to help navigate these rules. Following the code offers protection against criminal prosecution for unintentional underpayments.
