From January 1, 2025, Australia has taken a landmark step in workplace relations by criminalising the intentional underpayment of workers. This significant legislative change transforms what was previously considered a civil matter into a criminal offense carrying severe penalties, including imprisonment for individuals found guilty of intentional underpayment.

For businesses operating in high-risk industries such as horticulture, agriculture, large scale solar, construction and meat processing, understanding and complying with these new laws is essential for business continuity and legal protection.

This comprehensive guide explores the new legislation, its implications for employers and practical steps to ensure compliance while maintaining business efficiency and profitability.

 

The New Legislation: What Has Changed (Legislative Framework)

The criminalisation of wage underpayment comes through amendments to the Fair Work Act 2009 (Cth), which took effect on January 1, 2025. These amendments introduce criminal offenses for employers who intentionally engage in conduct that results in the underpayment of their employees.

The legislation applies nationally across all Australian states and territories, creating a uniform approach to tackling wage theft throughout the country. This federal approach ensures that all employers, regardless of location, are subject to the same standards and penalties.

A key component of the legislative framework is the Voluntary Small Business Wage Compliance Code Declaration 2024 (the Code), which provides small business employers with a pathway to avoid criminal prosecution by demonstrating their commitment to compliance.

 

What Constitutes a Criminal Offense?

Under the new provisions, an employer commits a criminal offense when they:

1. Intentionally engage in conduct
2. That results in an employee not receiving their full entitlements
3. Under the Fair Work Act or a fair work instrument (such as a modern award or enterprise agreement)

It’s important to note that the criminal provisions target intentional underpayment, not honest mistakes or administrative errors. However, even unintentional underpayments can still attract significant civil penalties.

 

The legislation covers all forms of employee entitlements, including:

– Base wages and salary
– Penalty rates
– Overtime
– Allowances
– Leave entitlements
– Superannuation (in some circumstances)

 

Penalties for Non-Compliance:

For Companies:
– Maximum fine being the higher of:
– 3 times the amount of the underpayment
– A$8.25 million

For Individuals:
– Maximum of 10 years’ imprisonment and/or a maximum fine, being the higher of:
– 3 times the amount of the underpayment
– A$1.65 million

In addition to these criminal penalties, civil penalties for non-criminal underpayment have also increased from January 1, 2025:

– For each contravention, the greater of $495,000 or 3 times the underpayment amount.

 

Impact On Various High-Risk Industries:

 

Horticulture:

The horticulture industry has faced persistent issues with underpayment, particularly among seasonal and migrant workers. Common compliance challenges include:

– Misuse of piece rates that fail to enable the average competent worker to earn the minimum legal hourly rate.
– Misclassification of workers to avoid paying higher rates for skilled work.
– Unpaid “set-up” and “pack-up” time.
– Excessive deductions for accommodation, transport, and equipment.

The Fair Work Commission has already implemented minimum wage requirements for pickers, eliminating previous loopholes that allowed underpayment. Horticulture businesses must now ensure that all workers, regardless of payment method, receive at least the minimum hourly rate under the Horticulture Award.

 

Agriculture:

Similar to horticulture, the agricultural sector relies heavily on casual and seasonal workers, creating compliance complexities. Key risk areas include:

– Remote locations with limited oversight
– Complex award provisions for different types of agricultural work
– Reliance on labour hire contractors without adequate due diligence
– Accommodation and transport arrangements that may involve unlawful deductions

Agricultural employers must be particularly vigilant about record-keeping and ensuring that all contractors and subcontractors comply with workplace laws.

 

Large Scale Solar:

As a rapidly growing industry, large scale solar projects present unique compliance challenges:

– Multiple contractors and subcontractors working on single sites
– Mix of construction and electrical work with different award coverage
– Remote locations with fly-in, fly-out workforces
– Project-based employment with changing workforce requirements

Solar industry employers should ensure clear classification of workers under the appropriate awards and maintain comprehensive records of hours worked and entitlements paid.

 

Construction:

The construction industry’s multi-layered subcontracting structures have historically created significant wage compliance issues:

– Complex subcontracting arrangements that obscure employment relationships
– Misclassification of employees as independent contractors
– Inconsistent application of site allowances and other entitlements
– Cash payments that may not be properly recorded or taxed

Construction businesses must implement robust systems to track all workers on site, verify their employment status, and ensure all entitlements are correctly calculated and paid.

 

Meat Processing:

Labour hire arrangements and shift work in meat processing facilities create particular risks for underpayment:

– High proportion of vulnerable workers, including migrants and temporary visa holders
– Complex shift arrangements with various penalty rates
– Physically demanding work with specific allowances and entitlements
– Potential misclassification of skill levels

Meat processing employers should conduct regular audits of their workforce arrangements, particularly where labour hire providers are involved, to ensure all workers receive their full entitlements.

 

Enforcement Mechanisms

 

The Role of the Fair Work Ombudsman:

The Fair Work Ombudsman (FWO) is the primary enforcement body for the new criminal provisions, with enhanced powers and resources to identify and investigate intentional underpayment. The FWO’s approach includes:

– Targeted audits of high-risk industries
– Responding to worker complaints with heightened scrutiny
– Utilising data analytics to identify suspicious payment patterns
– Collaborating with industry bodies to improve compliance
– Providing educational resources while maintaining a strong enforcement stance

The FWO has the power to investigate suspected criminal underpayment offenses and refer suitable matters for criminal prosecution to the Australian Federal Police (AFP) and the Director of Public Prosecutions (DPP).

 

Cooperation Agreements:

The legislation includes provisions for “cooperation agreements” that encourage employers to self-report underpayments. If an employer self-reports, they may have the opportunity to enter into a cooperation agreement with the FWO, at the Ombudsman’s discretion.

When considering whether to enter into a cooperation agreement, the FWO may consider factors such as:

– The extent to which the employer has made a ‘voluntary, frank and complete’ disclosure
– The employer’s cooperation with the Ombudsman
– The nature and gravity of the conduct
– The circumstances in which the conduct occurred
– The person’s history of compliance with the Fair Work Act

A cooperation agreement prohibits the FWO from referring the conduct for criminal prosecution but does not prevent civil action or non-punitive measures such as compliance notices.

 

Voluntary Small Business Wage Compliance Code:

Small business employers can protect themselves from criminal prosecution by complying with the Voluntary Small Business Wage Compliance Code. The Code provides a framework for small businesses to demonstrate that they did not intend to underpay their employees.

Key elements of the Code include:

– Regular review of applicable awards and pay rates
– Accurate record-keeping of hours worked and entitlements paid
– Prompt correction of any identified underpayments
– Training for managers and supervisors on workplace obligations
– Regular self-audits of payroll practices

The Fair Work Ombudsman has prepared guidance material on how the Code applies to small business employers, available on their website.

Practical Compliance Strategies

 

Conducting a Compliance Audit:

The first step in ensuring compliance is to conduct a comprehensive audit of your current payment practices:

1. Identify Applicable Awards and Agreements: Determine which modern awards or enterprise agreements apply to your workforce.

2. Review Classification of Workers: Ensure all workers are correctly classified based on their skills, responsibilities, and experience.

3. Verify Pay Rates: Check that all base rates, penalty rates, and allowances align with current minimum requirements.

4. Examine Record-Keeping Practices: Ensure you maintain accurate records of hours worked, breaks taken, and entitlements paid.

5. Assess Contractor Arrangements: Review any labour hire or contractor arrangements to ensure they comply with workplace laws.

6. Identify and Rectify Any Issues: If you identify underpayments, address them immediately and consider self-reporting to the FWO.

Implementing Robust Systems:

To maintain ongoing compliance, businesses should implement robust systems for workforce management:

1. Digital Time-Tracking: Implement electronic time-tracking systems that accurately record start times, finish times, and breaks.

2. Automated Payroll Calculations: Use payroll software that automatically calculates entitlements based on current award rates and conditions.

3. Regular Updates: Ensure your systems are regularly updated to reflect changes in minimum wages, award conditions and legislative requirements.

4. Audit Trails: Maintain comprehensive audit trails of all payments and adjustments to demonstrate compliance if questioned.

5. Integration with Accounting Systems: Integrate your payroll and accounting systems to ensure consistency in financial reporting.

 

Training and Education:

Ensuring key personnel understand their obligations is critical for compliance:

1. Manager Training: Educate managers and supervisors about workplace laws, award conditions and the serious consequences of underpayment.

2. Payroll Staff Development: Provide specialised training for payroll staff on complex award interpretations and calculation methods.

3. Regular Updates: Conduct refresher training whenever significant changes occur in workplace laws or award conditions.

4. Clear Policies: Develop and communicate clear policies on wage compliance, overtime approval and record-keeping requirements.

Due Diligence for Labour Hire Arrangements:

For businesses that use labour hire providers, conducting thorough due diligence is essential:

1. Verify Compliance History: Check the provider’s history of compliance with workplace laws and any past enforcement actions.

2. Review Pricing Structure: Ensure the provider’s pricing allows for payment of all legal entitlements to workers.

3. Contractual Protections: Include clauses in your contracts that require compliance with workplace laws and provide for regular audits.

4. Partner with Compliant Providers: Work with compliant and reputable labour hire providers with strong compliance records.

 

The All Seasons Workforce Australia Advantage

In this challenging compliance environment, partnering with a compliant labour hire provider like All Seasons Workforce Australia (ASWA) offers significant advantages:

 

Transparency and Compliance:

All Seasons Workforce Australia provides complete visibility into payment practices, which allows you to verify compliance. With comprehensive knowledge of the complex award structures in horticulture, agriculture, large scale solar, construction and meat processing, ASWA ensures all workers receive their correct entitlements.

 

Ethical Practices and Robust Systems:

All Seasons Workforce Australia ‘s commitment to ethical employment practices means you can be confident that all workers are treated fairly and paid correctly. We utilises advanced systems to track hours, calculate entitlements, and maintain comprehensive records, providing you with peace of mind and protection from compliance risks.

 

Nationwide Reach and Scalable Solutions:

With the ability to supply workers to every part of Australia, ASWA can meet your labour needs whether you’re in a remote location or metropolitan area. All Seasons Workforce Australia offers competitive rates that ensure your business gets the best workforce solutions without breaking the bank.

Performance Tracking and HR Support:

We monitor worker performance and reliability, ensuring only the best remain with your team. All Seasons Workforce Australia handles payroll, contracts, documentation and regulatory requirements for our workers, so you stay fully compliant while focusing on your core business operations.

 

Beyond Compliance to Ethical Leadership

 

The criminalisation of wage underpayment represents a watershed moment in Australian workplace relations. While it creates new compliance challenges for businesses, it also offers an opportunity to review and improve payment practices, ensuring fair treatment for all workers.

By understanding the requirements, implementing robust systems and considering partnerships with compliant providers like All Seasons Workforce Australia, businesses can navigate these changes successfully.

Remember, the new laws target intentional underpayment, not honest mistakes. By demonstrating a commitment to compliance and taking proactive steps to ensure correct payment, you can protect your business from criminal liability while contributing to a fairer workplace for all Australians.

 

Resources and Further Information

 

For more information on ensuring compliance with Australia’s new wage theft laws:

– Visit the Fair Work Ombudsman website: fairwork.gov.au

– Access the Voluntary Small Business Wage Compliance Code and supporting guide: legislation.gov.au/F2024L01635

– Contact All Seasons Workforce Australia on 1300 902 382 or visit allseasonsworkforce.com.au