Bill introduces wide application of criminalisation of wage theft

On 4 September 2023, the Australian Government introduced the Closing Loopholes Bill to the Federal Parliament.

As the name suggests, this tranche of Industrial Relations Legislation includes but is not limited to, provisions directed at what the Government has called loopholes that currently allow some employees to be paid less than their colleagues for the same work. However, the Bill is not limited to just closing loopholes.

One aspect of the Bill that has attracted controversy is the criminalisation of intentional wage theft. Underpayment of wages is unfortunately occurring across a range of industries in Australia, with recent examples including the ABC, Qantas, and a number of major supermarkets.

The Bill proposes a maximum penalty of 10 years imprisonment and a current maximum penalty of $7.825 million (based on the current value of a penalty unit), or three times the amount that was underpaid if that amount exceeds the maximum fine. The stated intention is that the penalty of imprisonment will be limited to employers who underpay employees intentionally, as opposed to by way of a genuine mistake.

Why is criminalisation controversial?

Critics of the legislation have called it a “step too far”, stating that it is unnecessary to impose penalties of imprisonment where employees already have the ability to instigate proceedings against their employer for any financial loss suffered. Given the existing consequences for employers, critics question if these changes will actually result in the stated purpose of greater employer compliance if enacted into law.

While the proposed offences may seem extreme to some, there has been legislation in Queensland and Victoria since 2020 and 2021, respectively, with penalties for wage theft, including periods of imprisonment.

What will the changes mean for businesses?

Employers should not panic, as the criminalisation is aimed at those who have engaged in underpaying staff intentionally, not in circumstances where the underpayments have been a genuine mistake.

The provisions of the Bill, if they become law, also provide encouragement to employers to self-report underpayments with the provision of new pathways for employers to follow to report and to rectify underpayments owing to their employees. Small businesses will not be criminally prosecuted for the underpayment of wages if they are able to demonstrate compliance with the “Voluntary Small Business Wage Compliance Code”. This Code has not yet been developed and therefore it is impossible to know what will be required by a small business to be compliant.

Is there anything business should be doing now?

Although the focus of these aspects of the Bill are on intentional underpayments, employers should be aware that unintentional underpayments also create significant financial and reputational risk.

In our experience the vast majority of unintentional underpayment arise from incorrect interpretations of the relevant Modern Awards or Enterprise Agreements which are then applied to the payroll system.  Unfortunately, such errors are rarely, if ever, identified in a standard audit process as such audits do not consider the interpretations which underpin the payroll set up.

Our HR and IR Consulting team can assist in ensuring your payroll is configured correctly and deliver accurate interpretation of the underlying Modern Awards or Enterprise Agreements. Where errors are identified we can also assist in the calculation and rectification of any underpayments to prevent ongoing underpayments or overpayments.  

We’re here to help

If you would like more information on the proposed Bill or would like to discuss next steps to review and mitigate the risk of incorrect payroll, please contact your usual Mazars advisor or alternatively, one of our HR and IR specialists via the form below or on: 

Brisbane – Cheryl-Anne Laird

Melbourne – Greg Halse

Sydney – Cheryl-Anne Laird

+61 7 3218 3900

+61 3 9252 0800

+61 2 9922 1166


Author: Cheryl-Anne Laird

Published: 13 September 2023

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