Australia’s workplace laws are evolving with the introduction of new underpayments legislation, effective 1 January 2025. These changes represent a critical shift in how wage compliance is regulated and enforced, with severe penalties for employers who fail to comply. This article explores the key legislative changes, common misconceptions, and practical steps businesses can take to align with the new requirements.
Key Changes in the Legislation
- Criminalisation of Intentional Underpayments – For the first time, intentional wage underpayment is being criminalised, with penalties including up to 10 years in prison and fines exceeding $7 million. This reinforces the importance of ethical and accurate wage practices.
- Significant Civil Penalties – Even in cases where underpayment is unintentional, the penalties are substantial. Employers can face fines of up to three times the underpaid amount, with serious contraventions (e.g., underpaying vulnerable workers) attracting fines exceeding $4 million.
- Expanded Employer Obligations – Employers are required to actively review and document compliance with wage laws, including award entitlements such as annual leave loading and overtime payments. This entails rigorous payroll reviews and alignment with modern awards or enterprise agreements.
- Enhanced Compliance Monitoring – Fair Work Ombudsman (FWO) powers have been strengthened, enabling closer scrutiny of payroll practices and more frequent audits to ensure compliance.
Common Misconceptions: “We Pay Above the Award, So We’re Safe”
One of the most common errors employers make is assuming that paying above-award wages exempts them from award compliance. This is not the case.
Award Coverage: The majority of Australian employees are covered by awards, even those earning above the minimum rates. Award coverage dictates entitlements such as annual leave loading, penalty rates, overtime, and allowances.
Significant Risk: Employers who overlook award obligations expose themselves to serious compliance risks. Backpay liabilities for leave loading, overtime, or penalties can be substantial.
Can You “Annualise” Salaries?
Yes, many employers can simplify payroll by “annualising” salaries. Subject to Fair Work Act and Modern Awards, this approach allows you to bundle award entitlements like base pay, overtime, and leave loading into a single salary. However, this must be done carefully:
- Documentation: Written agreements with employees are essential, outlining how the salary covers award entitlements.
- Regular Reviews: Annualised salaries must be reviewed periodically to ensure compliance with award requirements.
- Professional Advice: Missteps in structuring or calculating annualised salaries can lead to underpayment claims. Seeking professional guidance is critical.
What This Means for Employers
Employers must adopt a proactive approach to manage the increased compliance burden:
- Award Interpretation: Understand which awards apply to your workforce and the entitlements they mandate.
- Compliance Tracking: Maintain robust systems to track payments, entitlements, and conversion requests under both old and new casual employment pathways.
- Operational Adjustments: Implement systems that address new record-keeping and reporting requirements.
The Role of Workplace Culture in Compliance
Claire Harrison’s insights on employee motivation stress the importance of trust and fairness. A workplace culture grounded in compliance and ethical practices fosters higher engagement and reduces turnover, creating a win-win for employees and employers alike.
How Harrisons Can Help
Navigating these legislative changes can feel overwhelming, but Harrisons is here to help. Our expertise ensures your business remains compliant while maintaining a positive workplace culture. We offer:
- Award and Pay Audits: Identify gaps and risks in your payroll systems.
- Updated Employment Contracts: Ensure your agreements reflect current legislative requirements.
- Backpay Calculations: Handle any historical underpayments accurately and efficiently.
- Employee Communications: Develop transparent and trust-building messaging around compliance changes.
- Fair Work Liaison: Manage interactions with the FWO, ensuring your business is protected.
- On-Call HR Advice: Access real-time guidance to address compliance and operational queries.
Don’t let compliance risks threaten your business. Call Harrisons at 1300 001 447, email info@hhr.com.au, or visit www.hhr.com.au to safeguard your workplace and reputation today.
Claire Harrison is the Founder and Managing Director of Harrisons, a flourishing HR consulting business that sprouted in 2009 from Claire’s passionate belief that inspiring leaders and superstar employees are the key success factor to any business. With over 20 years’ experience, Claire has worked as a HR Director of multi-national organisations, as a Non-Executive Board Director, and a small business owner. Claire’s corporate career includes working with companies such as BHP, Westpac, Fonterra and Mayne Nickless.
