Wage-theft laws. What WA small businesses need to know

Since January 2025, new legislation has introduced criminal penalties for deliberate underpayment of wages in Australia. For small business owners, this was a critical update, especially given the complexity of modern awards and pay structures that can often confuse at first glance.

Honest mistakes or miscalculations aren’t the target.

However, and for small-business owners as well, the shift in the law is a reminder that compliance isn’t just about avoiding risk, it’s about doing right by your people.

• Criminal penalties apply for intentional wage underpayment (including lower wages, unpaid leave entitlements, or superannuation benefit arrangements)
• Penalties reflect a stronger enforcement approach– including potential imprisonment
• The law targets serious, deliberate breaches, not honest mistakes.

You may feel safe thinking “we’re a small business, we’ve never had issues” but that is now a high-risk position (especially now with Ai quickly sourcing and comparing data within seconds).

The good news for Small Businesses (those employing less than 15) is they have the Voluntary Small Business Wage Compliance Code.

Voluntary Small Business Wage Compliance Code.

• The Voluntary Small Business Wage Compliance Code offers a safeguard that, if you act in good faith and meet the Code, your case cannot be referred for criminal prosecution.
• The Fair Work Ombudsman (FWO) has also created a checklist/guide to using the Voluntary Small Business Wage Compliance Code – Fair Work Ombudsman

Key Points About the Code

• It’s voluntary but following it demonstrates a strong commitment to compliance.
• The FWO checklist is not the Code itself, but it’s a proactive tool that helps you align with the Code’s requirements.
• Using the checklist can reduce risk and show the FWO you’ve taken reasonable steps to comply.

Doing this isn’t just about ticking a legal box though, it actually sends a powerful and transparent message to your team that you value fairness and respect.

And that kind of culture pays back in loyalty, retention and reputation.

Here are some simple but effective steps you can take right now:

• Check awards, classifications, penalty rates and allowances are applied correctly.

• Audit recent timesheets and pay slips.

• Update employment contracts and role descriptions.

• Create or refresh an internal pay-entitlements checklist.

• Document your actions and keep evidence that you reviewed, updated and, where needed, corrected payments.

• If you suspect an under-payment, act now. Fix it, communicate with the employee, document the action and tighten the system to help prevent repeat problems.

The new laws don’t mean every payroll error equals criminal intent but they raise the bar for how small, medium and large businesses must behave.

For small business owners, compliance isn’t just about avoiding penalties – it’s about creating a fair and positive workplace culture that you can directly see into. *And* employees who feel valued and paid correctly will be more engaged and loyal.

Need help? Let us make compliance simple and stress-free – your employees and your business deserve it.