A voluntary code shielding small businesses from prosecution over wage underpayment is yet to be released, just weeks before wage theft is meant to become a federal crime.
Intentional wage underpayment is slated to become a criminal offence on January 1, 2025, as a result of the federal government’s Closing Loopholes industrial relations reform package.
Companies will face criminal penalties of up to $7.8 million, with individuals liable for up to ten years imprisonment.
To protect small businesses that unintentionally underpay wages from criminal prosecution, the legislation calls for the creation of a Voluntary Small Business Wage Compliance Code.
If the Fair Work Ombudsman (FWO) is satisfied that a small business complies with conditions set by the Code, it must not refer the business for criminal prosecution.
The Code, covering businesses with fewer than 15 employees, will be declared by the Minister for Employment and Workplace Relations Murray Watt.
But with the proposed January 1 deadline fast approaching, and small businesses trading in one of the busiest seasons of the year, the Code has not been made public.
As a result, small businesses are yet to learn how exactly the Code will provide them with safe harbour, above and beyond their compliance with existing guidelines.
Importantly, the Code itself is pivotal to wage theft becoming a federal crime.
The Closing Loopholes legislation states that intentional wage underpayment will become a criminal offence on the later of January 1, or the day after the Minister declares the Code.
This means if the Code does not materialise, the wage theft “provisions do not commence” at all.
In a statement provided to SmartCompany, a spokesperson for the Department of Employment and Workplace Relations said Minister Watt “intends to declare” the Code “before the end of the year, enabling the commencement of the new wage theft criminal offence on 1 January 2025.”
The Code will be published afterwards.
The FWO webpage discussing the incoming changes, last updated December 4, says the Code is “in the process of being developed” and advises visitors to keep checking for updates.
In a statement provided to SmartCompany, an FWO spokesperson also confirmed the Code will be published “prior to the commencement of the criminal underpayment offence”.
Wage underpayment is a major issue in Australia, depriving many employees of what they are owed.
The McKell Institute estimates workers are underpaid $850 million annually.
Although wage underpayment by major corporations dominate the headlines, Rippling says two in five SMEs admit to payroll errors.
Wage theft also reduces employee morale, and lowers the reputation of businesses in the eyes of the community.
Fair Work Ombudsman Anna Booth says the watchdog will not be afraid to refer deliberate wage underpayment for criminal prosecution once the laws come into effect.
“Certainly once the law has passed, if indeed it does, and there is a criminal liability, as long as the criminal standard of proof has been met, then criminal penalties could flow,” Booth said in October last year.
Small businesses looking to stay compliant with Australian workplace laws can access the FWO’s Small Business Showcase and Employer Advisory Service online.
The FWO’s advice on other elements of the Closing Loopholes package can be found here.
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Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
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