The Cost of Underpaying Staff: Navigating Australia’s Wage Theft Crackdown

Explore the legal and ethical essentials of managing redundancies in Australia. Featuring expert insights from employment law and HR specialists, this blog outlines the key obligations, common pitfalls, and practical steps for handling role changes with compliance and care. Ideal for HR leaders and employers navigating workforce change.

AI is rapidly transforming industries around the globe, and the human resources sector in Australia and New Zealand is no exception. With 54% of HR teams already investing in AI tools, according to people2people's Employment and Salary Report, it's clear that automation and predictive technologies are no longer futuristic concepts—they're part of today's evolving workforce strategy. Though nearly half of these organisations report no significant impact yet, the momentum is undeniable. From talent acquisition to onboarding and learning development, AI is starting to reshape how HR teams operate. Yet the journey is not without its complexities. "AI isn't a buzzword—it's a business advantage" Juma Mrisho, Talent Acquisition Business Partner, highlights the tangible gains AI can offer. "In terms of speed, efficiency, and decision-making accuracy, it’s definitely not just a buzzword," he explains. AI is already being used to streamline admin-heavy tasks, improve candidate matching, and personalise employee training pathways. However, barriers to broader adoption remain. As Mrisho points out, "The idea of inertia and resistance to change is something embedded in all of us." Concerns about return on investment, high costs, and the complexity of new systems are slowing uptake. Many traditional organisations are hesitant, needing time and guidance to adapt. Kaajal Khelawan, HR Manager and Operations Lead, addresses a common myth: "The biggest misconception is that AI will replace HR jobs. But the reality is it’s there to support them." She notes that AI tools require proper oversight, customisation, and human input to be effective—far from being plug-and-play solutions. Khelawan also warns against rushing implementation. "We’ve seen people adopt AI without fully understanding it, feeling pressured to innovate quickly," she says. For AI to work meaningfully, organisations must invest in education, planning, and change management. Looking ahead, both experts believe this is only the beginning. Mrisho envisions AI becoming a core part of HR over the next three to five years, powering everything from workforce planning to performance management. "The rapid growth of AI in just six to twelve months has been enormous. Thinking about where we’ll be in five years is genuinely exciting," he says. While AI opens the door to new possibilities, it also demands thoughtful integration. For HR teams in Australia and New Zealand, the focus must now shift from hype to strategy. As Khelawan concludes, "It’s best to approach it with an open mind. There are pros and cons, but with the right attitude, organisations can meaningfully assess how to adopt and benefit from it." In 2025 and beyond, HR professionals who balance innovation with insight will be best positioned to lead their teams into a smarter, more agile future.

In a major step to protect Australian workers, the federal government criminalised wage theft under the Fair Work Legislation Amendment Act 2023. From 1 January 2025, employers who knowingly underpay employees face penalties including fines up to $7.825 million or three times the amount underpaid. Individuals could also face up to 10 years in prison. This crackdown, driven by the growing concern that wage theft costs workers up to $1.5 billion annually, aims to create a culture of fairness and accountability in Australian workplaces. To explore how these changes are playing out, Colleen Deere, Acting Branch Manager at people2people in Perth, spoke with Antonino Meduri, Principal at AM Law & Partners. Their discussion shed light on what the new laws mean for businesses, the common pitfalls that still occur, and how organisations can proactively ensure compliance. "Employers now face serious criminal penalties for deliberate underpayments" Antonino explained the law's key shift: intentional wage theft is now a criminal offence. This applies to both direct entitlements like wages and leave, and indirect ones such as superannuation. Crucially, the law distinguishes between unintentional errors and knowing breaches. "Criminal conduct doesn’t happen when an employer is careless or even reckless. It happens when they knowingly underpay while being aware of their legal obligation to pay more," Antonino clarified. The legislation introduces four major components: criminalisation of wage theft, significant financial penalties, a self-reporting pathway that may prevent prosecution, and a voluntary code for small businesses. The self-reporting mechanism, in particular, offers a pathway for businesses that uncover underpayments and cooperate with the Fair Work Ombudsman to avoid criminal charges. Common Mistakes That Still Lead to Underpayment Claims While intentional wage theft garners the most attention, Antonino noted that most underpayments stem from avoidable errors rather than malice. He highlighted several frequent mistakes: Misclassifying employees : Many errors begin with incorrect award classification, especially in sectors like hospitality and aged care. "Failing to properly consider the legal obligations under the Fair Work Act can snowball into significant liabilities," Antonino warned. Incorrect penalty rates : Employers sometimes overlook weekend or holiday rates or fail to include casual loading during leave. Assuming salaried employees are always compliant : Even when a salary appears generous, if the employee's entitlements under the award are higher, the employer must make up the difference. Unpaid work : Trials or internships where the worker performs productive tasks must be paid, regardless of how the arrangement is labelled. What Good Compliance Looks Like in 2025 Antonino stressed the importance of prevention over reaction. "Good compliance is preventative and not reactive. It's about systems, transparency, and leadership," he said. Here are the key elements he advised businesses to adopt: Accurate classification and regular reviews : Ensure employees are correctly classified under the appropriate award and reassess annually. Pay audits : Regularly verify that pay matches the hours worked and entitlements due, especially for salaried staff. Strong record-keeping : Maintain detailed wage and time records for at least seven years. These not only ensure legal compliance but also serve as vital defence documents in case of claims. Training and accountability : Keep HR and payroll teams updated on legislative changes. Define clear roles for compliance oversight. Early response : If an error is discovered, fix it promptly, pay interest, and engage the Fair Work Ombudsman where necessary. Protecting Legal and Reputational Interests  Beyond compliance, Antonino offered advice on safeguarding a company’s legal and reputational standing: Embed compliance in governance : Treat wage compliance as a leadership issue, not just a payroll task. Independent audits : An external payroll or classification audit can uncover hidden risks before they escalate. Document everything : From employee classification to wage audits, detailed documentation forms the cornerstone of a legal defence. Clear response plans : Have strategies in place for backpay, media management, and engagement with regulators. Foster a culture of integrity : Encourage staff to raise concerns, protect whistleblowers, and promote wage compliance as a shared responsibility. Antonino concluded with a warning: non-compliance can not only invite legal consequences but also drain a business's time and resources. "Being proactive and transparent isn’t just about law—it’s good business." In summary, the new wage theft laws signal a strong shift towards accountability and fairness in Australia’s labour market. Businesses that embrace this change, investing in robust systems and a culture of compliance, will not only avoid legal trouble but build trust and resilience for the future.

As 2025 unfolds, work-life balance has firmly secured its place as the top priority for job seekers across Australia and New Zealand. According to people2people's latest Employment and Salary Report, flexibility is no longer a bonus; it’s a baseline expectation. With 78% of organisations offering flexible hours and 69% supporting remote work options, businesses that fail to adapt risk losing out on top talent. This cultural shift is driven by a desire for autonomy and trust. Employees today seek the ability to tailor their work around their personal lives, not the other way around. Kaajal Khelawan, HR Manager and Operations Lead, puts it succinctly: "Work-life balance has become such an imperative thing for all employees. They want independence. They want to be trusted."  "Flexibility is no longer a benefit. It’s an expectation." That said, physical offices still have a place—but their purpose is changing. As Khelawan explains, "There definitely is a place for in-office models, but their role has changed. It should be focused on collaboration and culture building." Rather than simply housing employees, offices are becoming hubs for engagement and connection. Juma Mrisho, Talent Acquisition Business Partner, highlights other rising trends in employee benefits. Beyond flexibility, mental health and wellbeing initiatives are increasingly valued, as are financial wellness tools, career development opportunities, and progressive leave types like grandparent leave and menopause support. Mrisho adds, "There’s growing interest in purpose-driven benefits that really reflect personal values." Meanwhile, traditional perks like snacks and Friday socials, while still appreciated, are no longer enough on their own. Employees today are seeking a more personalised experience at work. This move towards customisation over gimmicks signals a new era in HR strategy. "One size doesn't fit all anymore," says Khelawan. "There is an understanding that not everything can be tailored to an individual, but going with the status quo is probably not the best course of action either." For businesses struggling to keep pace with these evolving expectations, outsourcing HR support can offer much-needed clarity and agility. Conducting anonymous surveys can help uncover what employees truly value, from reasons for staying to the motivations behind exits. Khelawan explains, "We work with a number of different clients. We have access to market benchmarks, scalable benefit programs, and we can help tailor strategies to attract and retain talent without the overhead of a full HR function." Mrisho agrees, adding that external HR support offers the flexibility and insights needed to remain competitive, particularly in uncertain markets. As work-life balance becomes the cornerstone of employee satisfaction in 2025, it’s clear that understanding and adapting to these new expectations is no longer optional—it’s essential. Businesses that respond proactively will be best positioned to attract, retain, and support top talent in the year ahead.