Intentionally underpaying an employee’s wages or entitlements became a criminal offence from 1 January 2025. In relation to an underpayment, the Fair Work Ombudsman (FWO) cannot refer a small business employer’s conduct for possible criminal prosecution if they are satisfied that the business has complied with the newly-established Voluntary Small Business Wage Compliance Code (Code). Civil actions and penalties may still apply.
This Code provides practical guidance to aid businesses in compliance and aims to prepare and safeguard small business employers from criminal liability.
Who does the Code apply to?
The Code applies to small business employers, being those businesses who have fewer than 15 employees. However, the Code is designed not just to protect small businesses but also to act as a standard for all employers.
How can small business employers comply with the Code?
A small business employer will have complied with the Code if they did not intend to underpay their employee, having regard to relevant matters such as those set out in the Code.
The FWO will consider a range of factors including:
- whether the small business employer sought information or advice from reliable sources;
- any steps the business has taken to ensure they are paying their employees correctly and staying up to date with their obligations;
- any steps taken after finding out about the underpayment; and
- any steps taken to ensure the underpayment does not happen again.
Businesses do not need to fulfil every requirement within the Code to benefit from it. The FWO will review the overall compliance and the specific circumstances of the business in cases of underpayment to determine adherence to the code.
Practical advice and tools
The FWO’s guide offers a range of practical measures, including a checklist, examples, and tips to ensure employers are paying workers correctly and rectifying any discrepancies.
For comprehensive insights and practical guidance to assist your organisation to meet its obligations, reach out to the team at Emplawyer.
