Are businesses ready for wage theft criminalisation in 2025?

While the criminalisation of wage theft has added urgency to payroll compliance, it’s also an opportunity for businesses to rethink their approach to workforce management, writes Matt Loop.

For all Australian businesses, 2025 will be a watershed year, with the criminalisation of wage theft having taken effect on 1 January. These new laws specifically target intentional underpayments, such as withholding wages, entitlements, or superannuation contributions. However, inadvertent errors, such as miscalculations or delayed payments, can also attract regulatory scrutiny. The consequences for non-compliance are severe and could include fines, imprisonment, or both.

Now, payroll management is no longer just a back-office concern but a critical aspect of operational integrity for businesses of all sizes. What was once considered an administrative error could now lead to significant penalties and reputational damage. If businesses fail to address vulnerabilities in their payroll systems, they risk falling foul of these regulations.

So, why do businesses commit wage theft, and how can they best mitigate the risk down the line?

Why payroll systems are a key vulnerability

Many Australian businesses are still unprepared to meet the demands of this new regulatory environment. Our research from earlier this year showed that nearly 60 per cent of businesses made payroll errors in the past two years, ranging from underpayments to delays in wages. These mistakes typically stem from outdated processes and fragmented systems ill-suited to modern compliance requirements.

Changing industrial relations laws have further complicated the landscape, with the Closing Loopholes Act introducing major changes. According to our recent report, 22 per cent of businesses report an increased administrative burden as they adjust to new laws, such as the Right to Disconnect. This challenge is compounded by the fact that 63 per cent of organisations use three or more systems to manage HR, payroll, and finance functions, creating inefficiencies and increasing the likelihood of errors during data transfers.

With compliance thresholds tightening, businesses must address these systemic vulnerabilities. Here are five key steps organisations can take to safeguard against wage theft in 2025:

1. Audit existing payroll processes: Start with a comprehensive review of your current systems. Identify key areas of risk, such as reliance on manual data entry, inconsistent records, or delays in processing wages. It should include a review of how your organisation handles tax compliance, superannuation contributions, and employee benefits to ensure all obligations are met.
2. Transition to a unified platform: Fragmented systems are a major source of payroll errors. By consolidating HR, payroll, and finance functions into a single, centralised platform, businesses can reduce discrepancies and ensure consistency. Unified platforms provide a single source of truth, enabling real-time updates and better collaboration between departments.
3. Automate workflows: Manual processes are inefficient and error-prone, especially as compliance requirements become more complex. Automating tasks such as wage calculations, tax withholdings, and benefits management reduces the risk of human error while improving efficiency.
4. Strengthen collaboration across teams: Effective payroll management requires collaboration between HR and finance teams. Disconnected workflows and tools often result in misaligned data, creating opportunities for errors. Businesses should focus on improving communication and establishing shared accountability to prevent mistakes and ensure compliance.
5. Invest in training and education: Compliance is not just about systems; it’s also about people. Ensure that HR and payroll teams are trained on the latest regulations, including the requirements of the Closing Loopholes Act. Regular updates and professional development can help teams stay informed and confident in managing compliance obligations.

While the criminalisation of wage theft has added urgency to payroll compliance, it’s also an opportunity for businesses to rethink their approach to workforce management. By addressing systemic inefficiencies, organisations can build stronger trust with employees, improve operational efficiency, and safeguard their reputations.

Compliance goes beyond simply avoiding penalties. It’s an opportunity to showcase integrity, accountability, and a genuine commitment to fair treatment of employees – values that drive both workforce and business satisfaction.

Matt Loop is the vice president and head of Asia at Rippling.