It has been nearly 2 months since the Voluntary Small Business Wage Compliance Code came into effect, marking a significant shift in how wage compliance is assessed for small businesses.
From 1 January 2025, intentional underpayment of wages or employee entitlements became a criminal offence in Australia. The consequences are serious, including substantial fines and, in some cases, imprisonment. For many small business owners, this change has raised understandable concerns about payroll accuracy and compliance risk.
What is the Voluntary Small Business Wage Compliance Code?
The Voluntary Small Business Wage Compliance Code has been introduced by the Fair Work Ombudsman (FWO) to support small businesses with fewer than 15 employees in meeting their wage obligations under the Fair Work Act.
The Code is designed to recognise that mistakes can occur, particularly where Awards, penalty rates and allowances are complex. Where a business has genuinely attempted to comply with its obligations and has followed the Code, this may be taken into account in determining whether criminal prosecution is appropriate in cases of unintentional underpayment.
Importantly, the Code does not excuse deliberate or reckless conduct, nor does it remove the requirement to back-pay employees where an underpayment has occurred.
Why the Code matters in practice
For small businesses, the Code provides a framework to demonstrate that:
- wage compliance is taken seriously
- payroll processes are regularly reviewed
- errors are identified and corrected promptly
- professional advice is sought where required
In practical terms, this can make a meaningful difference if a business is audited or investigated by the FWO.
Practical support available to employers
The FWO has published guidance and resources to assist businesses in applying the Code, including:
- practical tools and checklists
- best-practice examples
- steps to review payroll systems and identify risks
- guidance on correcting underpayments
These resources are intended to help employers move beyond a “set and forget” approach and adopt ongoing compliance practices.
A word of caution
While the Code offers important protection, it is not a substitute for proper payroll systems, compliant employment contracts, or a clear understanding of Award obligations. Many underpayment issues arise not from intention, but from misunderstanding how penalties, overtime and allowances apply in real-world scenarios.
Need support?
If you are unsure whether your payroll practices align with the Code, or whether your business would be able to rely on it if an issue arose, obtaining advice early can significantly reduce risk.
For tailored guidance, contact the team at People Mosaic at info@peoplemosaic.com.au.
