New employment laws – Landmark changes from 1 January 2025
(Sponsored article)
A thought leadership article by Michael Polis, Managing Partner at Prince Consulting Group
1 January 2025 will mark the last major pillar of the Albanese Labour Government’s employment law reforms, when intentional wage underpayments will constitute a criminal and jailable offence.
To understand how we have got here, let’s consider the pathway to these changes which first commenced in September 2022, when the first Jobs and Skills Summit was held in Canberra. The Summit brought together industry, unions, and other stakeholder groups and set the scene for the significant reforms we have seen rolled out over the past 18 months.
Reform agenda
Key objectives of the original Summit included:
- keeping unemployment low, boosting productivity and incomes
- delivering secure, well-paid jobs and strong, sustainable wages growth
- broadly improving opportunities, rights and protections for workers, particularly those most disadvantaged and vulnerable workers.
Key legislative changes
Since the Summit in September 2022, many of those original objectives have now found themselves enshrined in legislation. The most critical of the changes are detailed in the table below:
What is the difference between wage underpayments and wage theft?
Wage underpayments can be broadly defined as an employee being paid less than their minimum pay rates and entitlements that were owed to them by their employer, typically unintentionally and because of a mistake or payroll error.
Wage theft is significantly different and consequential, in that it is where an employer underpays an employee by intentionally engaging in the act or omission of underpayment, and intended to cause the employee to be underpaid. This act often has elements of deception, exploitation and malicious intent.
Consequences of intentional underpayments?
At its most summary level, where there an intentional underpayment has occurred via an act or omission of an act, it will be deemed to be a criminal offence.
Penalties for a company – the following penalties will apply:
- if the court can determine the underpayment, the greater of 3 times the amount of the underpayment and $7.825 million, or
- if the court can’t determine the underpayment, $7.825 million
For an individual – the following penalties will apply:
- maximum of 10 years in prison
- if the court can determine the underpayment, the greater of 3 times the amount of the underpayment and $1.565 million, or
- if the court can’t determine the underpayment, $1.565 million.
Fair Work Ombudsman (FWO) fines – A clear shift in penalties
In the three financial years from 2021 to 2023, the FWO completed 53,088 disputes, with penalties totalling $9.3 million.
In the 7 months to August 2024, the FWO prosecuted 4 entities, with penalties exceeding $27 million. By any measure this represent a significant increase in fines and penalties.
Critically, the FWO have used their media releases to signal that underpayments will not be accepted, and that the consequences of non-compliance and deliberate underpayments will significantly increase from January 2025 in line with new legislation.
Comparative case studies – Three well-publicised cases:
Several common themes emerge from these cases:
- Negative themes: Poor record-keeping, management indifference, lack of oversight, and intentional breaches are recurrent factors in non-compliance.
- Positive themes: Organisations that addressed compliance issues proactively, improved governance structures, and engaged in active reconciliation saw fewer penalties and quicker resolutions.
Why are there so many cases of wage underpayments?
The Fair Work Ombudsman has pursued many employers who have actively or intentionally underpaid their employees. This includes a number of well publicised cases this year, including hospitality groups Sushi Bay who were fined a record $15.3 million in penalties for exploiting
workers, and franchisor group 85 Degrees who were penalised $1.44 million for failure to ensure compliance, including for franchisees.
The above cases are typically related to small to medium enterprises, who were either ambivalent or irresponsible in failing to adhere employee obligations.
In our experience the majority of wage underpayments in medium to large corporates are unintentional, and not cases of deliberate wage theft. The reasons for these underpayments tend to happen for one or more of the following reasons:
- Failure to keep up with changes. This primarily relates to regulatory changes and changes to industrial award and enterprise agreements
- Failure to invest in systems. This typically is a function of under-investment in systems and often poor integration of rosters, time and attendance, payroll and contracts
- Poor governance and reliance on individuals. This is usually driven by poor operating models, poor oversight and governance, and often reliance on individuals.
Feature of strong workplace compliance
At Prince Consulting, we have worked with some of Australia’s largest organisations. The characteristics of high performing and compliant organisations is a focus on clear and structured polices, processes and systems. We consistently observe the following features in compliant organisations:
- Commitment to governance and compliance
- Clear policies and processes
- Strong communication and training support
- System investment to ensure compliance
- Monitoring to pro-actively identify issues
- Reporting to people leaders, executives and boards
- Active responses to address non-compliance.
A checklist for future workplace compliance
For organisations either at the start of their compliance journey, or those looking to validate compliance, a check-list approach can often be helpful. It is worth considering:
- Investment in technology:
Ensuring current systems are in place that integrate payroll, rosters, time and attendance, and contract management. These are typically crucial for accurate record-keeping and compliance tracking. - Governance:
Effective governance requires a strong oversight framework that reduces reliance on individual employees and embeds compliance into the organisation’s operational DNA. This includes monitoring and reporting from front line leaders, through to executives and boards. - Training and monitoring:
Regular training for managers and employees on compliance requirements can help keep everyone aligned. Continuous monitoring of compliance efforts ensures that issues are identified and addressed promptly. - Compliance expertise:
Developing your people and partnering with compliance experts enables up-to-date knowledge and strategic insights into managing regulatory risks effectively.
Conclusion
Workplace compliance goes beyond a legal obligation; it is foundational to organisational values and commitment to your people. The consequences of neglecting governance and compliance are significant, and will soon be subject to criminal prosecution where it is deliberate.
By investing in systems, strengthening governance, and staying ahead of regulatory changes, organisations can protect their reputation, safeguard their employees, and build a sustainable, compliant business environment.
To learn more: https://princeconsulting.com.au/resources/
Michael Polis
Managing Partner
Prince Consulting
T: 0437 995 179
E: michael.polis@princeconsulting.com.au
Michael is co-founder and Managing Partner at Prince Consulting Group. They are industry specialists in workforce compliance, wage remediation, time and attendance and payroll solutions.