New criminal underpayment laws have started.
As of 1 January 2025, intentional underpayment of wages or entitlements may constitute a criminal offence.
The Fair Work Ombudsman (FWO) has the authority to investigate suspected criminal underpayment cases and refer appropriate matters for criminal prosecution. If convicted, individuals may face fines, imprisonment, or both.
It’s important to note that penalties apply to intentional underpayments and do not encompass honest mistakes.
Common Areas Where Underpayments Are Often Found:
Not Applying Award Entitlements: failing to understand that an Award applies to an employee, (even where an employee is paid a higher salary), resulting in missed entitlements.
Misclassification of Employees: Incorrectly classifying employees as contractors, casuals, or part-time workers when they should be permanent staff, resulting in missed entitlements such as leave or minimum hours.
Part-Time and Casual Loading: Not paying casual loading or ensuring part-time employees are paid their contracted hours as required under their Award or agreement.
Miscalculation of annual leave and long service leave entitlements: Misinterpreting or failing to apply the correct methods of payment for leave. Long service leave can be particularly complex.
Failure to Pay Annual Leave Loading: Not providing the required leave loading, often set at 17.5%, as stipulated in many Awards and agreements.
Unpaid Overtime or Breaks: Not compensating employees correctly for overtime hours or failing to provide legally mandated breaks often leads to compliance issues.
Public Holiday Penalties: Misunderstanding or failing to pay penalty rates for employees working on public holidays.
Underpayment of Minimum Wage Increases: Not updating payroll systems to reflect annual increases in the national minimum wage or Award wages.
Superannuation Shortfalls: Employers frequently overlook their obligations to pay the correct percentage of superannuation on all eligible earnings, including certain bonuses or allowances.
Unpaid Training or Meetings: Overlooking payment for mandatory training, inductions, or meetings that occur outside of regular working hours.
Reimbursement Errors: Failing to reimburse employees for work-related expenses, such as travel, tools, or uniforms, as required under Awards or agreements.
Are you confident you’re paying employees under the correct Award?
Are you certain you’re using the right Classification?
HRM is here to help. We offer Payroll Audits to ensure your compliance. Contact our team today at 5430 7750 or email us at ask@hrmcc.com.au.
