New Wage Theft Laws

$1.3 billion in underpayments since 2019 the tip of the iceberg

The Fair Work Ombudsman has recovered around $1.3 billion between mid-2019 and mid-2023. Although some unscrupulous employers knowingly underpay employees, underpayments more commonly involve employers struggling to interpret modern awards or enterprise agreements. What can employers do to help ensure they pay their employees correctly?

The true extent of underpayments

Australians are underpaid an estimated $1.35 billion each year (PwC). This suggests that the $1.3 billion the Fair Work Ombudsman has recovered since 2019 is just the tip of the iceberg.

The new laws relating to underpayments

At the end of 2023, the Australian Government passed legislation introducing stricter civil penalties for wage theft and related matters which commenced in January 2024.

The new wage theft laws also introduce criminal penalties from 1 January 2025. The maximum criminal penalties for employers (and individuals within those employers) who deliberately underpay employees include imprisonment of up to 10 years imprisonment and maximum fines set at the greater of three times the amount of the underpayment and $7.825 million.

Common mistakes

• employers who do not comply with all of the terms of a modern award or enterprise agreement because they pay an employee an annual salary they believe to be more generous than the rates in the award or agreement

• non-compliant employment contracts, especially those containing annual salaries for employees covered by modern awards or enterprise agreements

• failure to keep records such as rosters, time sheets and any approved changes to hours worked in each period

• misinterpreting modern awards or enterprise agreements

What should employers do?

• correctly identify any industrial instrument which covers an employee and the classification in which they are employed

• ensure that employment contracts re up-to-date, compliant - just some of the things that should be covered include ordinary hours, days of work, start and finish times and averaging arrangements

• comply with record-keeping obligations - in many cases it is impossible to calculate pay correctly without accurate rosters, time sheets and any written changes to work hours in each period

• understand when employees must work their ordinary hours, manage any additional hours, track changes to ordinary hours and rosters, record hours worked, including the actual times that employees start and finish their breaks

Contact Hennings Lawyers to discuss how you can prevent or resolve any underpayment or compliance issues.

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