As a small or medium-sized business owner, you’re no stranger to juggling responsibilities. But there’s one area you can’t afford to get wrong: employee pay. Australia’s workplace laws are complex and getting it wrong isn’t just a matter of fixing a spreadsheet. It could mean facing criminal penalties.
With the introduction of criminal wage theft laws in early 2025, underpayments that are considered deliberate can now lead to millions in fines and even jail time. While honest mistakes aren’t criminal, proving that your intentions were above board can be challenging—especially if your HR systems are less than watertight.
Why Wage Compliance Is So Complicated
Even with the best of intentions, underpayments can easily occur due to:
- Misinterpreting the correct modern award (there are over 120 of them!),
- Misclassifying employee roles,
- Missing penalty rates or overtime entitlements,
- Relying on outdated payroll software,
- Poorly worded employment contracts or vague job descriptions.
And when awards change (like the annual 1 July rate increase) you need to be across it before your next pay run.
The Risk for SMEs
Larger businesses often have internal HR and legal teams keeping a close eye on compliance. For SMEs, the same expectations apply, but without the same resources. That’s why small businesses can be particularly vulnerable – not just to making errors, but to being unable to prove they weren’t intentional.
If you can’t demonstrate due diligence, clear systems, or documented efforts to get things right, you could find yourself in hot water even when a mistake was accidental.
How to Protect Your Business
The good news? There are straightforward ways to reduce your risk and build confidence in your payroll and employment practices:
Get the right advice early – Don’t rely solely on generic government templates or guesswork. HR consultants can help you identify which award applies, classify roles correctly, and ensure your contracts protect you and your staff.
Invest in regular audits – A quick payroll check today can save a costly investigation tomorrow. Regular audits catch errors before they become serious problems.
Educate your team – Managers, payroll staff, and supervisors need to understand the basics of employee entitlements and employer obligations. Knowing when overtime kicks in or what counts as “ordinary hours” can prevent accidental breaches.
Keep your records in order – Accurate, up-to-date documentation (including timesheets, contracts, and pay slips) is your safety net if things are ever questioned.
Act quickly if you think something’s gone wrong – If you suspect an underpayment, correct it immediately, seek professional advice, and consider self-reporting to Fair Work. Proactive action can go a long way in demonstrating compliance and avoiding criminal penalties.
Compliance doesn’t have to be overwhelming. At , we specialise in helping SMEs stay on top of their obligations, so you can focus on growing your business, not worrying about back pay.
Need help reviewing contracts, understanding award rates, or setting up better payroll processes? Contact our experienced HR consultants today on 02 8977 4000.