If you’re the owner or manager of a small business, keeping up to date with workplace laws, payrates, Award changes etc… can sometimes feel like a full-time job. With recent changes to Australia’s wage compliance landscape, it’s more important than ever to understand your obligations and the protections available to you when mistakes happen.
One of the most significant developments this year has been the awarding of powers to the Fair Work Ombudsman (FWO) to refer employers for criminal prosecution (with penalties including up to 10 years in prison) where they are of the view that the employer has deliberately underpaid or withheld entitlements from their employees.
The FWO CANNOT however make such a referral if they are satisfied that a small business employer (ie, a business with fewer than 15 staff) has complied with what’s known as the Voluntary Small Business Wage Compliance Code (“the Code”).
While that will give small business employers some level of peace of mind, it is important to note that the FWO and others may still take civil action against a small business employer and those involved in underpaying employees. Such civil actions may include, for example, the issuing of Compliance Notices and/or significant fines or other penalties.
How is compliance with the Code determined?
Generally speaking, a small business employer will be deemed to have complied with the Code if it is clear that they did not intend to underpay their employee.
The FWO will consider a number of factors in determining whether or not a small business employer intentionally underpaid their employee, including:
- any steps the employer/business took to check they’re paying their employees correctly
- steps taken by the employer to remain up to date with changes (including any minimum pay increases or legislative updates)
- steps taken by the employer after identifying potential or actual underpayments, including correcting mistakes and promptly rectifying them, and
- steps taken to ensure underpayments do not happen again.
How can I be sure I’m paying people correctly?
While not itself part of the Code, the documentation associated with the Code includes some useful tips, information and links for small businesses looking to ensure that they meet their obligations as an employer. Indeed, it highlights the need for employers to:
- regularly check for correct pay rates and entitlements utilising the resources available at www.fairwork.gov.au
- follow all obligations related to the issuing of pay slips and maintenance of records
- keep up to date with pay, entitlements and workplace laws via FWO updates and potentially subscribe to updates from other reputable sources including employer associations and the like
- access specialist help when required, through the FWO, employer associations, HR Success or another reputable provider, and
- promptly and effectively investigate and correct any issues/problems identified.
Click here to download the Guide to Paying Employees Correctly and the Voluntary Small Business Wage Compliance Code.
What the Code Doesn’t Cover
It’s crucial to note that the Code is not a “get out of jail free” card for deliberate or repeated non-compliance. If an employer intentionally underpays staff, tries to cover up mistakes, or is a repeat offender, the protections of the Code won’t apply. The FWO will still have the power to investigate and refer serious breaches for prosecution.
Final Thoughts
For small business owners and managers, the Voluntary Small Business Wage Compliance Code offers a bit more peace of mind. It recognises that mistakes can happen and provides a fair, transparent process for putting things right.
For full details, visit the Fair Work Ombudsman’s Voluntary Small Business Wage Compliance Code page.
If you’re unsure about your obligations or need help navigating wage compliance, contact us for practical, friendly support.
P.S. A great starting point for checking HR compliance in your business is our free Smallbiz HR Compliance Scorecard. Check it out here.
This article provides general information which we believe to be correct at the time of posting. It is a summary and must not be considered complete, professional or legal advice. If you’re an employer and need support that takes into account your particular circumstances, please contact us directly.
