From 1 January 2025, wage theft laws became a lot tougher and the implications for small businesses could be significant. Under the Government’s Closing Loopholes legislation (covering the Fair Work Amendment (Closing Loopholes) Bill 2023 and the Fair Work Amendment (Closing Loophol es No.2) Bill 2023) the deliberate underpayment of employees is now a criminal offence and carries severe penalties, including hefty fines and prison time. However, even accidental underpayments can lead to substantial civil penalties.

For small businesses, staying compliant has never been more critical (or challenging). Here’s a straightforward breakdown of what you need to know to navigate these changes confidently.

What’s changing and what’s at stake?

The new laws aim to target employers who intentionally underpay employees. However, small businesses should note that unintentional breaches, while not criminal, could still result in civil penalties. The Fair Work Ombudsman (FWO) is now empowered to investigate cases and enforce penalties for both deliberate and accidental underpayments and small businesses found to have breached wage laws may face:

• Up to $99,000 in fines for accidental breaches.
• Tripled fines for ‘serious contraventions’ where recklessness is proven.
• For intentional wage theft, fines could reach up to $8.25 million for companies and $1.65 million for individuals, as well as carry up to 10 years in prison for those involved.

What exactly is wage theft, and how does it happen?

Wage theft includes actions such as:

• Paying below minimum wages, penalty rates, or overtime entitlements.
• Failing to pay full superannuation contributions on time.

Although wage theft is deliberate or intentional, accidental errors due to complex payroll systems or a misunderstanding of obligations can still result in financial penalties under separate provisions if not rectified promptly.

Introducing the Voluntary Small Business Wage Compliance Code

To support businesses with fewer than 15 employees, the Voluntary Small Business Wage Compliance Code offers a pathway to avoid criminal prosecution for accidental underpayments. Compliance with the code involves:

• Identifying and fixing errors: Taking prompt action to rectify underpayments, including backpaying employees and adjusting payroll systems.
• Staying informed: Subscribing to Fair Work updates and checking for changes to Modern Awards and pay rates.
• Seeking advice: Consulting reliable sources like the FWO, employer associations or professionals such as our HR Advisory Service to ensure employees are paid correctly.
• Demonstrating good faith: Cooperating with FWO investigations and showing proactive compliance efforts.

The FWO assesses compliance with the code on a case-by-case basis and will consider factors such as the employer’s efforts to address errors, the circumstances of the underpayment and steps taken to prevent future issues.

According to Fair Work, there are a range of factors that can show an employer has complied with the Code, including: 

Source: Fair Work Ombudsman – Voluntary Small Business Wage Compliance Code

Practical steps for small businesses

It’s crucial to prioritise key compliance areas that will help safeguard against unintended breaches and align with evolving wage theft regulations. 

Take the following steps to protect your business against risk:

Audit your payroll systems: Review wages, entitlements and superannuation to ensure accuracy.

Train staff: Regularly upskill payroll employees and subscribe to Fair Work newsletters for updates. Employment Hero’s HR Advisory Service also regularly sends out updates on changes to the law that affect pay compliance.

Correct errors quickly: Fix underpayments as soon as they’re identified and notify employees.

Invest in reliable payroll software: The reality is, that even just one incorrect calculation or one misclassification can snowball and lead to disastrous, albeit unintended consequences for your business. Thankfully, modern Employee Operating Systems (eOS) have been purpose-built to navigate changes like these. As a digital one-stop-shop that brings together all HR-related functions under one digital roof, an eOS will have in-built Modern Award interpretation, powerful payroll engines and access to employment experts that can help companies confidently manage their obligations. 

Consult experts: Seek advice from the FWO or other trusted advisors such as Employment Hero’s HR Advisory Service to ensure compliance with the law.

The bottom line

Australia’s employment legislation is among the most complex in the world, and even small mistakes can have costly consequences. For small businesses, aligning with the Small Business Wage Compliance Code and adopting proactive measures is the best way to navigate these changes confidently.

By staying informed and compliant, small-business owners can protect their businesses while ensuring fair treatment for their employees – a win-win in the evolving world of workplace law.

The post Making sense of Australia’s new wage theft legislation: what small businesses need to know appeared first on Inside Small Business.

Hailed as a world-first, the legislation will enhance protections across the economy by setting out consistent and enforceable obligations for businesses in key sectors where scammers operate.

This passage of the Scam Prevention Framework is seen as the first step in the fight against scams with amendments to the industry codes for banks, telcos and digital platforms expected to follow to strengthen Australia’s scam prevention efforts.

The framework will also see to it that banks will also be held to account to ensure their customers are protected from fraud and other financial scams, as established by the banking industry’s Scam-Safe Accord. 

Speaking on behalf of the banks, Australian Banking Association (ABA) CEO Anna Bligh welcomed the development, saying that Australia was leading the way in its comprehensive approach to scam prevention.

“This is a game-changer in the fight against scammers and will ensure all parts of the scams chain are held to account for their responsibilities to prevent, detect, report, disrupt and respond to scams,” Bligh said. “Our world-first approach will make sure telcos and the digital platforms have strong safeguards in place to stop scams from reaching consumers.”

ABA Chief of Policy Christopher Taylor said with the framework now enshrined in law, it was important effective mandatory industry codes were developed to ensure all regulated entities are required to take strong action to combat scams.

“Banks will now work closely with the Government and other sectors on the development of mandatory industry codes as well as a single complaints body to provide more consistent outcomes for customers,” Taylor said. “We also encourage the Government to move promptly to expand the framework to other sectors such as cryptocurrency, superannuation and other payment providers.”

Bligh noted that while losses incurred by businesses due to scams declined by 33 per cent, there is still much work needed to be done in the scam prevention front, which Scam Prevention Framework is envisioned to strengthen.

“We now have the legislative foundation to stay one step ahead of scammers and drive them out of Australia,” she said.

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1. Intentionally underpaying employees will become a federal crime

From 1 January 2025, intentional underpayment of wages or entitlements can be a criminal offense. Small-business employers will be subject to this legislative change.

ISB has previously reported on small businesses accidentally underpaying workers due to misunderstandings. We heard from small businesses and experts alike that the complex IR system can lead to mistaken underpayments. 

In response to these concerns from the community, the Fair Work Ombudsman has introduced a Voluntary Small Business Wage Compliance Code to help small businesses avoid criminal prosecution. The Code includes steps like “working out correct pay rates” and “seeking information from a reliable source about paying employee entitlement correctly”. If these steps are satisfied, then it’s unlikely that the employer will be found to have intentionally underpaid employees.

2. Tax and BAS agents will be under stricter ethical and operational requirements

Tax and BAS agents will have new obligations next year. These will apply from 1 July 2025 for tax practitioners with 100 or less employees, and 1 January 2025 for all other tax practitioners.

For small businesses, this will mean that your tax agents will be under stricter ethical and operational requirements. According to the Tax Practitioners Board, these include keeping proper client records, having quality management systems in place, and keeping clients informed.

3. “Introductory” classifications can only apply to employees for a limited time, under some awards

Some awards will have new rules for introductory classifications early next year. These classifications can now only apply for a limited time.

If you’re unfamiliar with introductory classifications, these refer to the first stage of a job, i.e. in an induction or training period. They often allow an employer to pay an employee below minimum wage, under the assumption that they are still gaining the basic skills and experience required for the job. The new laws will mean that employees can only be in this introductory stage, with below-minimum-wage entitlements allowed, for a limited period. 

The new time limit on introductory classifications varies between affected awards, but it will be applicable for a maximum of six months. 

A list of affected awards is available here. For all affected awards bar the Horticulture Award, the changes will take effect on 1 January 2025.

4. The ‘right to disconnect’ will apply to small businesses

From 26 August 2025, small-business employees will have the right to refuse work-related contact outside of regular business hours.

The laws already apply to businesses with over 15 employees, but are reportedly not having much of an impact. According to a survey by Indeed, 79 per cent of employees are still fearful of disconnecting from work-related messages after hours.

Additionally, many small businesses say they rely on flexible hours and integrated work schedules – meaning they have no set working hours. The legislation may therefore not be relevant to their working lives either.

Recent changes to know

A couple of key pieces of legislation have been passed in these last few weeks of 2024. These include a crackdown on unfair trading practices, a new banking code of practice, and new legislation making the reporting of cybersecurity incidents mandatory.

The post The 2025 legislative changes that small businesses should know appeared first on Inside Small Business.

Looking ahead, SMEs are likely to face similar challenges and must be prepared to adapt to these ongoing tumultuous conditions. Some of the biggest challenges facing SMEs in 2022 include:

Costs of managing the workforce

Like most organisations, one of the biggest challenges for SMEs is finding ways to improve efficiency while reducing costs. Tracking overhead costs can put SMEs in a better position to manage and reduce them. High staff turnover, employee onboarding, and repetitive administrative tasks are areas that can have a substantial financial burden on a business. For example, if SMEs experience high voluntary turnover, they will spend a significant amount of time and money on recruiting to fill the gaps. Instead, SMEs can trim overhead costs by implementing a unified software system that automates as many human resources (HR) processes as possible, including time-consuming onboarding processes. This can also help SMEs make data-driven decisions to unlock growth and improve their bottom line.

Staff shortages

SMEs continue to face staff shortages, with ABS data showing 31 per cent of businesses are struggling to hire suitable staff to fill jobs.2  Without qualified staff, SMEs struggle to maintain and improve employee engagement, and therefore also struggle to reduce turnover in a highly competitive market. Of the staff who remain, illness and unexpected absences create scheduling issues and leave businesses short-staffed, putting pressure on other staff to pick up the slack. SMEs should look to elevate the employee experience to attract and retain talent with automated solutions that keep future and current employees engaged and motivated.

Inflation spike

Australia’s growing inflation challenge is negatively affecting ill-prepared SMEs, with concerns that flow-on effects of increased wages will reduce job creation and make it harder for small businesses to avoid passing costs on to customers.3  High inflation and a potential recession affect not just employers but also employees, especially when it comes to pay, benefits, and workplace models. SMEs can cope in a high inflation environment by adjusting prices, prioritising high-profit-margin products, and keeping turnover rates low. For example, now is a great time for employers to consider financial support tools such as same-day pay and give employees access to earned wages, when and where they need them.

Constantly changing legislation

During the pandemic, the government made several amendments to Fair Work legislation, including rules around workplace rights and regulations around wage changes, sick leave, and pay slips. This has caused confusion with SMEs struggling to understand what to do to meet the requirements of the Fair Work Act, leaving themselves at risk of non-compliance. Navigating compliance in the face of constant regulatory change requires a proactive strategy. With the right technology, SMEs can streamline compliance processes and keep pace with new standards, while making a real difference in the lives of their employees. 

In the face of uncertainty, it’s imperative that SMEs adapt to a changing landscape with smart choices that can enhance efficiencies without incurring additional costs. By implementing automated, self-service solutions that deliver streamlined and people-centric processes, SMEs can deliver a strong return on investment in a shorter timeframe and overcome key concerns facing businesses now and in the future. Failing to adapt to an ever-changing economy could leave SMEs unable to provide a people-first experience that could help them attract and retain the best talent.

The post The state of small and medium-sized businesses in 2022 appeared first on Inside Small Business.

The Australian Small Business and Family Enterprise Ombudsman Bruce Billson has welcomed the development, which is the fulfilment of an election promise by the Albanese government.

Billson has previously met with different small businesses who have highlighted the unfair contracts problem.

“We see in many contracts we review, examples of unfair terms. This is an area ripe for change,” Billson said. “Power imbalances between small business and large enterprises are exacerbated by unfair business practices and unfair contract terms.”

Billson said that addressing those issues through the proposed legislation will aid in rebalancing the small business-large enterprise relationships and promote economic growth.

“I encourage large enterprises doing business with smaller firms to be a kindly customer – patient and understanding, with good and generous intent, especially around contract terms,” the Ombudsman said. “Small businesses are run by real people who deserve our respect and empathy everyday.”

Billson has also welcomed the government’s move to update the definition of a small business in the proposed legislation to increase the eligibility threshold from fewer than 20 employees to fewer than 100 employees and introduces an annual turnover threshold of less than $10 million as an alternative threshold for determining eligibility.

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