Navigating the Voluntary Small Business Wage Compliance Code

New Wage Theft Legislation

New wage theft legislation has been implemented as of January 1, 2025. This legislation criminalises the deliberate underpayment of an employee’s wages or entitlements. Deliberate underpayment involves knowingly paying less than the required minimum entitlements or failing to pay an employee on time.

Employers found guilty of wage theft may face significant penalties, including fines and imprisonment. It is crucial to understand that the legislation differentiates between deliberate underpayment and genuine errors. While unintentional underpayment will not result in criminal charges, employers are still required to promptly rectify any mistakes and take measures to prevent them in the future.

Alongside the introduction of new criminal penalties, the current civil penalties for underpayments will rise for non-small business employers (greater than 15 employees).

Voluntary Small Business Wage Compliance Code

The Voluntary Small Business Wage Compliance Code 2025 is relevant for smaller businesses i.e. employers with fewer than 15 employees. The Code is designed to help small business employers meet their wage obligations without the fear of punitive measures, provided they act in good faith and do not intentionally underpay their employees.  

Starting January 1, 2025, the Code establishes guidelines for small business employers to ensure accurate employee payments. To comply, employers need to take appropriate measures to verify the accurate pay rates and entitlements for their employees, which includes examining relevant awards, enterprise agreements, and the National Minimum Wage Order.

How Small Businesses Can Ensure Compliance

To comply with the Voluntary Small Business Wage Compliance Code, small business employers should adopt several proactive measures. These could included:

1. Education. Thoroughly review and understand the code, ensuring they are familiar with the specific requirements and assessment factors.
2. Complete regular Audits. Conduct regular audits of wage payments and employment contracts can help identify and correct any discrepancies before they escalate into major issues. Consistently reviewing the relevant awards, enterprise agreements, and the National Minimum Wage Order is essential to ensure that your pay rates and entitlements are up to date.
3. Communication. Establishing clear and open communication channels with employees regarding their wages and entitlements is an important step. This will enable employees to raise concerns promptly and prevent them from escalating.
4. Establish Payroll Systems. Using effective payroll systems with reliable software to accurately track employee hours, pay rates, and entitlements will help minimise discrepancies. 
5. Record keeping. Maintaining detailed records is essential, ensuring precise and comprehensive documentation of employee hours, pay rates, and entitlements.
6. Employment contracts. Ensure contracts are written by an appropriate HR specialist or employment lawyer to ensure correct wage standards are adhered to.

This is not intended to be legal advice. If you are uncertain about any aspect of wage compliance, we recommend seeking advice from a qualified legal professional who can offer tailored guidance for your business. Expert advice will help ensure you remain compliant with the law and avoid costly mistakes. 

The Fair Work Ombudsman

The Fair Work Ombudsman plays a crucial role in overseeing and enforcing the Voluntary Small Business Wage Compliance Code. When assessing whether a small business has complied, the Ombudsman will review the overall picture and the specific circumstances of the business. Guidance on the Code and paying employees correctly is available for small business employers on the Fair work ombudsman’s website: https://www.fairwork.gov.au/about-us/compliance-and-enforcement/criminal-prosecution/voluntary-small-business-wage-compliance-code 

Key Takeaways

Adhering to the Voluntary Small Business Wage Compliance Code offers several benefits for small businesses. Firstly, it helps build trust and transparency with employees, which can enhance a business’ reputation as an employer, and improve workplace morale and productivity. Employees are more likely to feel valued and respected when they know their employer is committed to fair pay practices.

Additionally, compliance can protect businesses from legal risks and potential penalties associated with wage underpayments. Ultimately, adhering to the code fosters a positive work environment and contributes to the overall success of the business.