Wage theft laws: what’s coming in 2025 and how employers can avoid the fines

Wage theft is about to get a lot more serious in Australia, with new federal laws coming into effect in January 2025. This isn’t just about a slap on the wrist anymore; now, underpaying workers could land you in court, facing fines or even jail time. Victoria led the charge with similar laws in 2021, and the rest of the country is catching up. So, what’s changing, and what does this mean for employers? Let’s break it down.

What exactly is wage theft?

Wage theft is when a business doesn’t pay employees what they’re entitled to—whether that’s underpaying wages, skipping super payments, or short-changing leave entitlements.

The key thing with these new laws is the intent behind it. If you’re intentionally not paying someone properly, you could be in serious trouble. And when we say trouble, we’re talking up to 10 years in jail or fines up to $1.1 million for businesses. It’s not just about fixing payroll mistakes anymore; it’s about making sure you’re doing everything by the book.

The biggest mistake businesses make is award classifications

The number one area where businesses slip up is with award classifications. This happens all the time—people are put on the wrong award or aren’t classified correctly within an award. The other misconception is that Managers or high-paid workers are award-free. And if you’re not paying the right rates, overtime, or allowances, you’re setting yourself up for a wage theft claim.

Let’s look at a typical scenario: You’ve got an employee working in hospitality, but they’re classified at a lower level than what their duties actually require. Maybe they’re a cook, but you’ve got them down as a kitchen hand. That means they’re being underpaid. Even if you didn’t mean to do it, under the new laws, this can still be treated as wage theft if it’s happening over a period of time and isn’t corrected.

What’s changing in 2025?

From January 2025, the federal government will make deliberately underpaying workers a criminal offence. That means wage theft will now be treated as a crime, not just a breach of workplace laws. The penalties are designed to be tough to ensure businesses take payroll compliance seriously.

  • Jail time: If found guilty of intentionally underpaying workers, individuals can face up to 10 years in prison.
  • Fines: For companies, the penalties are even heftier—up to $1.1 million.

It’s not just about wage payments either. Superannuation is included, and with upcoming changes around payday super (by 2026), businesses will need to stay on top of this, too. If you’re not paying super correctly, you’re at risk.

Where businesses go wrong: simple mistakes with big consequences

A lot of wage theft issues stem from mistakes that seem minor but can snowball into big problems. Here’s where businesses typically fall down:

  1. Award classifications: As mentioned, this is the big one. Get the classification wrong, and you’ll end up underpaying people.
  2. Award Free—If you say things like, “We pay well above the Award, so we aren’t covered by an Award,” then you could be unknowingly committing wage theft. This is a common misconception, and many professionals are covered by catch-all awards like the Professional Services or Miscellaneous Awards.
  3. Annualised Salaries – Many employers pay their employees an all in annual salary and then use an offset clause so they don’t have to pay things like overtime, penalties or leave loading. This is 100% doable, but you need to do annual better-off overall tests to ensure that the employees are being paid above and beyond their award. Many Awards now have specific clauses about annual salaries and the requirement to track hours and keep records. Hours and pay should be audited annually, and if there is a shortfall, then you need to backpay the employee.
  4. Failure to keep up with award changes: Awards and agreements change all the time, and businesses often fall behind. You need to be on top of the updates to ensure you’re paying the right rates, penalties, and allowances.
  5. Superannuation payments: Missing super payments, even by accident, can count as wage theft. With real-time payment requirements coming in the next couple of years, this will become even more critical.
  6. Not fixing known errors: It’s one thing to make a mistake, but it’s another to leave it unresolved. If an employee points out that they’re being underpaid, and you don’t act quickly to fix it, you’re at risk.

What you can do to protect yourself

With these new laws, businesses need to act now to avoid hefty fines or worse. Here’s how you can get ahead of the changes:

  • Audit your payroll: Make sure you’re paying everyone correctly. This means double-checking that award classifications are correct, that the right allowances, overtime and  are being paid, and that superannuation is up to date. A thorough payroll audit can catch mistakes before they become a huge underpayment claim.
  • Stay informed: Awards and agreements change frequently. Make sure you’re getting updates and reviewing your pay structures regularly. Most businesses that get caught out just aren’t paying attention to changes in award rates or classifications.
  • Educate your team: Often, the people signing off on rosters and timesheets aren’t aware of the complexities of awards. Make sure managers understand the importance of correct classification and pay rates, so they don’t unintentionally get your business into trouble.
  • Fix problems quickly: If a payroll mistake is flagged, don’t ignore it. Act fast to correct any issues and make back payments if needed. The longer the mistake continues, the more it looks like wage theft.

Real-world examples of wage theft

The restaurant industry is notorious for wage theft cases. Take George Calombaris, the celebrity chef who made headlines for underpaying his staff by $7.8 million. While he avoided criminal charges under the current system, under the new laws, this kind of underpayment could land business owners in jail.

Another example is a small cleaning business that didn’t keep up with award changes and accidentally underpaid their workers for months. Even though it was a mistake, the underpayment added up to thousands of dollars, and the business was hit with heavy penalties.

Final thoughts

The new wage theft laws are designed to protect workers and hold employers accountable. It’s no longer enough to plead ignorance or claim payroll complexity—if you’re not paying people what they’re owed, you’re breaking the law.

For businesses, this means it’s time to get serious about compliance. Whether you’re a small business or a big one, it’s essential to make sure your payroll systems are up-to-date, and you’re paying attention to awards and agreements. If you’re not sure where you stand, it’s worth getting expert advice now, before these laws come into play.

If you need help getting your house in order, HR Gurus can work with you to make sure you’re ready for the changes and protected from hefty fines. Don’t wait until it’s too late.

Written By Emily Jaksch

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