Ensuring employees are paid correctly is a fundamental responsibility for all employers. To strengthen wage compliance, the Australian Government has introduced the Voluntary Small Business Wage Compliance Code. From 1 January 2025, intentionally underpaying employees will be a criminal offence, with penalties including fines and potential imprisonment.
What Constitutes Underpayment?
Underpayment occurs when an employer fails to meet wage and entitlement obligations, which may include:
- Paying employees less than the applicable award or enterprise agreement requirements.
- Not providing correct penalty rates, overtime, or allowances.
- Failing to meet statutory obligations, such as superannuation contributions where required.
While genuine payroll errors will not be considered criminal offences, deliberate underpayments may result in prosecution by the Fair Work Ombudsman.
Exemptions from the Code:
The criminal offence provisions do not apply in certain circumstances, including:
- Employees in NSW, SA, QLD, TAS, and VIC who are employed by sole traders, partnerships, unincorporated entities, or non-trading corporations.
- Victorian state government employees.
- Tasmanian local government employees.
Employers should review the Guide to Paying Employees Correctly to ensure compliance with the new Code. If you require assistance in understanding your obligations or implementing necessary payroll adjustments, please contact our team for professional guidance.
