Intentional vs unintentional - a wage conundrum

Business Monitor is all about risk management and business compliance. We understand the reasons regulators do what they do and, although we may not always agree, we strengthen business risk management by reviewing every aspect of business practice when asked.

This month we have had cause to look at the risks relate to “wage theft “or underpayment of workers, effectively stealing from them.

From January 1st, 2025, new legislation makes intentional underpayment of wages or entitlements a criminal offence. This applies to deliberate failures to pay wages, leave entitlements, superannuation or salary sacrifice arrangements on time.

Outsourcing payroll does not abrogate your responsibility – so ensuring you have payroll management firmly fixed in your business risk radar is important – as the legislation changes frequently.

In recent work with two small business clients, they were managing payroll internally using a software platform and issues arose with regard to worker payments - quite different but was it intentional?

One client received a Compliance Notice after some workers had raised concerns that they were being underpaid. They were students and felt they were not being heard.

The client came to us asking for advice and to ensure they could strengthen their systems, so this won’t happen in the future.

The compliance notice had simple actions: calculate the underpayments and pay the impacted workers. This was done and then Business Monitor completed a Business Monitor Review to determine any other gaps in compliance, developed a plan for improving business practice generally and encouraged the client to add payroll management to the Risk Management Procedure and as an item on the Risk Register to be reviewed at Management Meetings. The client did not want to take the outsourced payroll route, despite our recommendations.

The second client was challenged during their labour hire licence application on their calculations for worker payments and entitlements in their forecast Business Plan. During our review we assisted them to ensure they were reflecting the correct Award and entitlements and that they had taken into account superannuation increases from July 1.

The importance of an accountant and a bookkeeper in labour hire applications is a requirement for this reason as is ensuring the number of workers you predict matches the wages and entitlements expenses in your Business Plan.

Neither of these cases were “intentional” under the definition but suffice to say if an issue is raised the regulator is obliged to ask the question and act.

Contact us to find out how we can strengthen your Risk Management Procedures and review your Risk Register or book a Business Monitor Review - what we find may surprise you!