From 1 January 2025, it is now a criminal offence to intentionally underpay an employee’s wages or entitlements. Intention is a key component of the offence. Employers cannot be convicted unless it is established that the underpayment was intentional.
To assist employers with the new system, the Fair Work Ombudsman has released a Guide to paying employees correctly and the Voluntary Small Business Wage Compliance Code.
The guide is useful to all employers. It is unlikely that an employer will be prosecuted if they can demonstrate that they downloaded a copy of the guide and implemented it. It is especially useful for small businesses, who cannot be referred for prosecution if they have complied with the Voluntary Small Business Wage Compliance Code.
The guide indicates that when investigating an alleged intentional underpayment, the Fair Work Ombudsman will consider whether an employer:
- Has taken reasonable steps to work out correct pay rates and entitlements;
- Made reasonable effort to stay up to date with changes to their obligations, including in workplace laws.
- Checked and relied on employee information the employer reasonably believed was accurate in relation to paying wages.
- Sought information or advice from a reliable source about paying employee entitlements correctly.
- When seeking information or advice, provided information that the employer reasonably believed was accurate.
- Took a voluntary step to fix any underpayment.
- Cooperated with any inquiry or investigation that the Ombudsman conducts about the underpayment.
Other factors might be relevant, such as what led to the underpayment or how the employer became aware of the underpayment.
