Small Business Wage Compliance Code Released

The Fair Work Ombudsman has released the Voluntary Small Business Wage Compliance Code, which will take effect alongside Australia’s new federal wage theft laws on 1 January 2025.

These laws make it a criminal offense to intentionally underpay employees, with penalties including fines of up to $7.825 million for companies and potential imprisonment for individuals of up to 10 years.

WHAT IS THE CODE?

The Voluntary Small Business Wage Compliance Code (the Code) aims to provide small businesses (those with fewer than 15 employees) with a framework to avoid prosecution for underpayments that occur unintentionally. However, this is not a traditional black-and-white code, but rather, what we consider to be a discretionary set of guidelines. The Code is not a ‘checklist’ – an employer is not required to meet every factor, nor is there one factor that must be met in order to achieve compliance.

Unlike the Small Business Fair Dismissal Code, which provides clear protection against unfair dismissal claims if followed, compliance with the Code will be determined by the Fair Work Ombudsman (FWO) on a case-by-case basis.

The Code encourages businesses to take “reasonable steps” to fulfill their wage obligations, but there is no guarantee of immunity. The FWO will assess factors such as whether a business has taken steps to educate itself on its obligations, kept accurate timesheets and payslips, sought external advice when needed, and promptly corrected any underpayments. This discretionary approach introduces grey areas that may leave employers uncertain about whether they have met the Code’s expectations.

CONSEQUENCES & RECOMMENDATIONS

Given the serious consequences of non-compliance, including backdated liability for patterns of underpayment conduct prior to January 2025, small business employers are strongly advised to take proactive measures. These include (at minimum):

• Familiarise yourself with the Code
• Review payroll practices
• Ensure your team is appropriately trained in award interpretation and entitlements
• Use only reliable payroll systems
• Implement regular internal and external auditing, particularly for flat rate and salary employees
• Seek professional advice to ensure compliance

Addressing underpayments immediately and implementing robust systems to prevent future errors will also likely demonstrate good faith if mistakes occur.

WHERE TO GET HELP

While the Code is voluntary, the risks of non-compliance are significant. Our team is here to help you navigate these complex requirements and ensure your business is well-positioned to comply with the new wage theft laws. If you have concerns or would like to review your payroll systems and processes in 2025, please contact us to discuss tailored solutions for your business.

Any person involved with advising on or interpreting Awards and entitlements should also consider the Short Courses offered by Edwards HR in 2025. You can view our Short Course information online here.

For further information or assistance, please refer to the Fair Work Ombudsman's official page on the Voluntary Small Business Wage Compliance Code.  

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