This article applies to all national system employers in Australia.

Fair Work Legislation Amendment (Closing Loopholes) Act 2023 (Cth)

On 1 January 2025, relevant provisions of the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 (Cth) (the Amending Act) amended the Fair Work Act 2009 (Cth) (the Act).

What’s changed?

From 1 January 2025, it is a criminal offence under the Act for an employer to intentionally underpay an employee.

Further Information

New wage theft offence

From 1 January 2025, under the newly introduced section 327A of the Act, an employer will commit an offence if they are required to pay an amount to an employee (i.e. wages), or on behalf of, or for the benefit of an employee under the Act, a Fair Work instrument (such as a modern award or enterprise agreement), or a transitional instrument.

The penalties for breaching section 327A are significant, with a penalty of up to 10 years imprisonment for an individual. The maximum fine for the new wage theft offence is:

• if the court can determine the underpayment amount for the offence – the greater of 3 times the underpayment amount and whichever of the following applies:
  • for an individual – 5,000 penalty units (currently $1.65 million);
  • for a body corporate – 25,000 penalty units (currently $8.25 million); or
• otherwise – the following amount:
  • for an individual – 5,000 penalty units (currently $1.65 million);
  • for a body corporate – 25,000 penalty units (currently $8.25 million).

It is important for organisations to be aware that the new offence above applies to intentional wage theft only. The underpayment of an employee’s wages will not be considered a criminal offence if the court can determine that the employer did not intentionally underpay the employee, and the underpayment was instead the result of an honest mistake or honest miscalculation.

Voluntary Small Business Wage Compliance Code (applicable to small business employers)

It is also important to note that the Fair Work Ombudsman cannot refer a small business employer (i.e. broadly an employer with less than 15 employees at a particular time) for possible criminal prosecution if it is satisfied that the small business employer has complied with the Voluntary Small Business Wage Compliance Code (Code) in relation to the underpayment. The Code is available here.

In short, a small business employer will comply with the Code if they didn’t intend to underpay their employees, and this will be assessed by examining a range of factors (including for example whether the employer considered and relied on information about the employee that the employer reasonably believed was accurate (such as the employee’s role, duties, classification, relevant qualifications, age, hours of work and location of work) in relation to the payment of applicable amounts to, on behalf of, or for the benefit of, the employee).

We encourage organisations that are small business employers to review the ‘A guide to paying employees correctly and the Voluntary Small Business Wage Compliance Code’ which is available for download on the website of the Fair Work Ombudsman here. The purpose of this Guide is to assist small business employers to take steps to pay their employees correctly, and to understand and access the protections of the Code in their organisation.

What you should do

While the new criminal offence introduced to the Act applies to intentional wage theft, organisations are encouraged to take proactive steps to review their organisation’s current payroll practices and systems to ensure all employee entitlements are accurate.

Moreover, organisations should also check employment classifications to ensure employees are correctly classified under their appropriate and relevant modern award.

Organisations that are small business employers should also takes steps to ensure compliance with the Voluntary Small Business Wage Compliance Code.

Lastly, organisations may wish to schedule a regular payroll audit to ensure that any discrepancies are identified, and appropriate steps are taken to promptly address any discrepancies affecting an employee’s entitlements.