Employers urged to review payroll systems to avoid wage theft penalties

As of 1 January 2025, intentional wage underpayment has been criminalised, drawing hefty penalties for employers found to be intentionally shortchanging their workers.

Employers with outdated, fragmented payroll processes may be at risk of penalties under new anti-wage theft laws, workforce software firm Rippling warned.

“Multiple, siloed systems increase the chances of payroll mistakes, while manual entry all but guarantees a higher error rate,” Rippling said.

“Although new legislation imposes harsher penalties for deliberate underpayment, the reality is that many ‘accidental’ cases persist because employers haven’t modernised their payroll infrastructure.”

Underpayment is a common issue for Australian workers, with material consequences for employees’ financial wellbeing. A survey by Rippling found that 43 per cent of workers had been underpaid in 2024.

Of the workers experiencing underpayment, 40 per cent said they struggled to pay essential bills, 36 per cent said that it was difficult for them to buy groceries or maintain a healthy diet, while 32 per cent risked missing rent or mortgage payments.

Over half (59 per cent) of Australian employers admitted to payroll errors over the past two years, often due to outdated processes and fragmented systems, Rippling found.

They warned employers that small payroll errors could have serious repercussions for their employees, with many struggling to meet basic financial obligations.

“If these errors persist, it could erode employee trust, reduce morale, and damage your company’s reputation,” Rippling said.

Accounting firm BDO Australia warned employers that they could face consequences ranging from large fines to jail time under the new anti-wage theft laws, which introduced harsher penalties for employers that deliberately underpay their workers.

An individual employer could face up to 10 years’ jail time or $1.56 million in fines, while corporations could face fines up to $7.8 million. Both could also be fined three times the value of the underpayment, which could be even steeper, BDO said.

While the laws focus primarily on deliberate underpayment, BDO has warned that significant penalties could still apply if conduct was accidental.

Over 63 per cent of businesses juggled three or more HR and payroll solutions, while 48 per cent relied on manual data entry, Rippling found. This boosted the chance of errors, potentially leading to penalties under the new laws.

BDO urged employers to remain proactive with their payroll systems and conduct regular audits to ensure compliance and address discrepancies properly.

“It is … critical that employers are aware of and compliant with paying their employees the correct Instrument entitlements,” BDO said.

“Employers need to be confident in historical, current, and future payments made to employees and actively implement changes as they arise.”