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Protected: New employment laws – Landmark changes from 1 January 2025

A thought leadership article by Michael Polis, Managing Partner at Prince Consulting Group 

The 1st  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: 

  Change  Consideration 
1  Amendments to Sex Discrimination Act
(November 2022) 
  • Employer and leaders duty to eliminate sexual harassment, discrimination, hostile workplace environments and victimisation 
  • Prohibits subjecting anyone to a workplace environment that is hostile on the ground of sex 
  • A lower threshold for sex-based harassment, by requiring the conduct to be ‘demeaning’  
2  Closing the loophole legislation
(December 2023) 
  • To ensure labour hire based employers pay their employees the same rate of pay as ‘host’ employers pay their own employees 
  • New rights and protections were introduced for workplace delegates 
3  New definition of employee and employer
(February 2024) 
  • New ‘ordinary meaning’ definition employee and employer 
  • Primarily relates to determining status of an employee versus independent contractor 
4  Right to disconnect
(August 2024) 
  • Protections to employees who now have a positive right to refuse monitoring, reading or responding to contact outside of their agreed work hours 
  • There are provisions that allow contact where the right to refusal is deemed unreasonable 
5  Casual Employment changes
(August 2024) 
  • Fundamentally shifts the interpretation of casual employment from contractual basis to the nature of work performed 
  • Critically, the employee remains a casual employee unless they choose to trigger a ‘specified event’ to change employee status 
  • Employers must alert employees to their rights at given anniversary dates 
6  Wage theft – Criminalising intentional wage underpayment
(1 January 2025) 
  • An employer will commit an offence if they fail to pay an employee their full benefit or entitlement. 
  • This will be deemed a criminal offence where, beyond reasonable doubt, the underpayment was intentional.  
  • Fines or imprisonment may apply to an entity or individual 

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 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 it’s 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 $9.3m. 

In the 7 months to August 2024, the FWO prosecuted 4 entities, with penalties exceeding $27m. 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: 

Commonwealth Bank of Australia  Insurance Australian Group  85 Degrees Cafe 
~$16m underpayments  ~$29m underpayments  ~$16m underpayments 
~7,400 employees  ~19,000 employees  ~7,400 employees 
$10.3m fine  $0.6m fine  $10.3m fine 
FWO references: 

  • Knew of issues 
  • Took years to address 
  • Management indifference 
 FWO references: 

  • Future compliance focus 
  • Reconcile payroll 
  • Governance and board intent to fix 
 FWO references: 

  • Repeat offenders 
  • Deceptive & poor records 
  • Franchisor responsibility 

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: Organizations 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 $15.3m in penalties for exploiting workers, and franchisor group 85 Degrees who were penalised $1.44m 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 intentional wage theft. The reasons for these underpayments tend to happen for one or more of the following reasons: 

  1. Failure to keep up with changes. This primarily relates to regulatory changes and changes to industrial award & enterprise agreements 
  2. Failure to invest in systems. This typically is a function of under-investment in systems and often poor integration of rosters, T&A, payroll and contracts 
  3. Poor Governance and reliance on individuals. This is usually driven by poor operating models, poor oversight & 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 compliant organisations structured around: 

  • 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:  

  1. Investment in technology:
    Ensuring current systems are in place that integrate payroll, rosters, time & attendance, and contract management. These are typically crucial for accurate record-keeping and compliance tracking. 
  2. 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. 
  3. 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. 
  4. 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. 

Prince Consulting

To learn more: https://princeconsulting.com.au/resources/

Michael Polis
Managing Partner
Prince Consulting
T: 0437 995 179
E: [email protected]

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.

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