Starting 1 January 2025, Australia is introducing new criminal underpayment laws that could significantly impact small business owners. These laws make intentional underpayment of wages or entitlements a criminal offence, with potential penalties including fines, prison time, or both.
As a small business owner, staying informed and proactive is essential to ensure compliance and avoid the risk of prosecution.
Here’s a breakdown of what these changes mean for your business and the steps you can take to stay compliant.
What Are the New Criminal Underpayment Laws?
Under the new laws, deliberately underpaying employees—wages, leave entitlements, or superannuation—could now be classified as a criminal offence. This is part of a broader push to ensure fair treatment of workers and enforce accountability among employers.
Who Is Affected?
The laws apply to all employers, but small businesses are particularly vulnerable due to limited resources and a lack of in-house compliance expertise. If you employ a handful of staff or run a growing team, these changes will apply if you intentionally underpay wages or fail to meet entitlements.
How to Protect Your Business
1. Voluntary Small Business Wage Compliance Code
One of the most significant safeguards introduced is the Voluntary Small Business Wage Compliance Code. By adhering to this code, small business owners can demonstrate proactive compliance and protect themselves from criminal prosecution.
Key highlights of the code include:
- Regular self-audits of payroll and wage payments.
- Detailed record-keeping to demonstrate compliance.
- Prompt rectification of any underpayments identified.
2. Cooperate with Authorities
Businesses that cooperate with regulatory bodies and show a genuine effort to correct underpayment issues may reduce the risk of severe penalties. Transparency and collaboration with authorities can make a significant difference in the event of an investigation.
Other Key 1 January 2025 Changes
In addition to the criminal underpayment laws, there are other important updates for small business owners to be aware of:
- Changes to Entry-Level Classifications in Awards: Updates to minimum classifications in awards may affect how new employees are paid.
- Aged Care Work Value Case: Specific changes to awards in the aged care sector may impact businesses operating in this space.
Reviewing these updates and how they align with your current payroll structure is crucial to ensure compliance.
Steps You Can Take Now
To avoid potential issues and stay ahead of these changes:
- Conduct a Payroll Review
Review your payroll processes to ensure wages, leave entitlements, and superannuation payments are accurate and compliant with relevant awards. - Educate Yourself on the Code
Download and review the Voluntary Small Business Wage Compliance Code to understand what’s required and how it can protect your business. - Invest in Payroll Solutions
Use accounting software to streamline payroll processes and minimise human error. Tools like Xero can automate compliance checks and ensure your records are up-to-date. - Seek Professional Help
Engage a professional bookkeeping or payroll service to ensure your business remains compliant. Experts can help you identify any gaps and implement best practices. - Stay Informed
Subscribe to updates from regulatory bodies to keep track of any future changes that may affect your business.
How Accounts All Sorted Can Help
The introduction of criminal underpayment laws marks a significant shift in employer accountability, emphasising the importance of payroll accuracy and compliance.
At Accounts All Sorted, we provide tailored payroll solutions to help small businesses ensure compliance and streamline processes. From reviewing your payroll setup to managing superannuation and STP lodgements, our team works with you to safeguard your business against compliance risks.
Contact Accounts All Sorted today to discuss how we can support your business with expert payroll and bookkeeping solutions.
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