On the 1st of January 2025 new laws surrounding wage theft come into effect across Australia under the Fair Work Legislation Amendment (Closing Loopholes) Bill 2023. These laws include harsh penalties for offending business owners, including significant fines and jail times.
What is Wage Theft?
Wage Theft is where an employer fails to pay an amount on behalf of, or for the benefit of, the employee under the Fair Work Act 2009 (FWA), Modern Award or Enterprise Agreement, when it is due. Not including:
Contributions to a superannuation fund for the benefit of the employee;
Long service leave under state or territory legislation;
Leave for victims of crime;
Paid jury service/emergency services leave.
To be convicted of wage theft it must be proven that an Employer or Individual has engaged in intentional conduct (in act or omission) that would (or did) result in failure to pay the required amount in full on or before the day it was due.
In simple terms, it is intentionally underpaying or not paying employees what they are due, when it is due, under the Fair Work Act or the relevant Award/Agreement.
How might an employer commit wage theft?
There are many ways that employers may commit wage theft. This could include making decisions about how to classify someone under an Award classification, using an incorrect Award, making decisions around how overtime is paid or not following the process outlined in various Awards for flexibility on how and when work is performed.
The employer must be proven to have intentionally made a decision that would result in underpayment. As a summary, employers may intentionally make decisions regarding employee payments that result in:
Paying below the minimum hourly rate;
Incorrect Award application or classification;
Only allowing unpaid breaks;
Refusing to pay overtime, or paying overtime incorrectly;
Not abiding by penalty rates;
Not paying appropriate allowances;
Not paying public holiday entitlements;
Deducting from wages unlawfully, such as to pay for till shortages;
Not paying staff at all.
If convicted, what are the penalties?
In the legislation there are significant penalties for Employers and indviduals convicted of Wage Theft.
For an Individual:
A fine of 3 times the underpayment amount, or not more than 5000 penalty units (currently $1.565 million in total) – whichever is greater, and/or;
A term of imprisonment not more than 10 years.
For a Body Corporate:
A fine of not more than 25000 penalty units (currently $7.825 million).
How can I prepare my business for these changes?
To prepare for the changes on January 1st, 2025, it is important that businesses employing staff build a robust HR and Payroll function to avoid intentional or unintentional errors.
We suggest focusing on the following key areas:
1. Engage Human Resource Experts
Utilising an appropriate third-party HR expert to provide advice on Award application and interpretation can help mitigate both unintentional and intentional risks relating to employee entitlements.
Terms and conditions within the Fair Work Act (and associated legislation) and Modern Awards are often tested and interpreted through case law. A good HR consultant will ensure they maintain their knowledge of case law relating to employee pay, conditions and entitlements.
We suggest engaging qualified HR consultants that are part of a professional body requiring continuing professional development, a lawyer or an industry body with a HR consulting function to ensure you get sound advice.
2. Implement an employee time tracking solution
Great advice and appropriate interpretation of industrial instruments is the cornerstone, but unless an organisation is keeping appropriate records of the times, days and hours that an employee works, then the advice will have limited effect.
A time tracking system can be as simple as paper timesheets and rosters, or more sophisticated with geolocation linked to automatic clock-in and clock-out, automatic calculation of required breaks and management rostering with employee shift swapping. Paper systems are easy and cheap to implement, however they lack control, require higher administrative input and don’t allow for reporting on employee time and profitability.
A good time tracking software and system will ensure lower human error for data input, reduce administrative burden and also provide a level of automation around rostering and time calculations.
Some suggested systems include Employment Hero, XeroMe, Planday, ELMO, Tanda, and Deputy, however there are many available. Our advice is to engage an external HRIS consultant to help you choose and implement a solution.
3. Automated Payroll Software with an Award interpretation engine or custom rulesets
Once an employee has been correctly classified against an award and you have an accurate record of hours, it is important to ensure that pay entitlements are appropriately calculated and paid to employees. Many payroll software’s allow for the setup of basic pay categories such as overtime and penalty rates. Some software packages also include an automated Award interpretation engine or allow for custom rulesets to be created that automatically apply the correct rate of payment based on the Award.
This removes the chance of human error when applying rates of pay to an employees recorded hours and protects against unintentional or intentional wage theft.
Having your time tracking system linked with a payroll system that provides Award interpretation provides a robust payroll process. Possible software solutions that offer some Award interpretation include Deputy, Tanda, Employment Hero, Planday with Xero.
Want Help?
For a free review of your current payroll and HR function relating to employee entitlements, call our team on 0408 067 087.
We are passionate about helping businesses implement great solutions to reduce HR and payroll admin and increase quality of data and compliance.
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