Welcome to 2025! To start off the year, there are some law and award changes that took effect on 1 January.
All employers need to be aware of these, as there are significant penalties for not complying.
New Fair Work Act wage theft laws
Deliberate underpayment of employee wages is now a criminal offence under the Fair Work Act and employers who intentionally underpay an employee can be subject to criminal prosecution.
The law covers the deliberate failure to pay wages, benefits (e.g. superannuation), allowances or other entitlements an employee is entitled to under the Fair Work Act or an industrial instrument, such as a modern award.
The amounts must be paid on or before the day they’re due.
There are some exceptions for certain employees in relation to superannuation contributions, long service leave payments, and some leave payments.
Suspected underpayment offences will be investigated by the Fair Work Ombudsman (FWO).
Employers who unintentionally underpay their employees or pay incorrect amounts by mistake will not be criminally liable. The FWO will also have the discretion not to pursue criminal proceedings if an employer identifies and reports underpayments, and enters into a co-operation agreement (the FWO will still be able to commence civil remedy proceedings).
Small businesses (those with 15 or fewer employees) who follow the Voluntary Small Business Wage Compliance Code are protected from criminal prosecution for underpayments.
Voluntary Small Business Wage Compliance Code
The Voluntary Small Business Wage Compliance Code (and supporting guide) helps employers ensure they are paying their employees correctly and to quickly address any issues if they arise.
The code acts as a checklist, spelling out a “non-exhaustive” list of factors the FWO must consider before referring small businesses and company directors for criminal prosecution for underpayments. This includes whether the business genuinely tried to educate itself on its payment obligations, e.g. assessing award coverage and applicable entitlements, seeking guidance or advice.
The FWO will also consider if the business genuinely tried to stay on top of its obligations, including keeping up with legislative changes or amendments to registered agreements or modern award terms.
Other factors include whether the business took voluntary steps to backpay staff, how quickly it did so, and if it put in place measures to fix any issues.
The code also lists extra factors that could influence the FWO’s decision and acknowledges the complexity of employing workers and obligations in relation to employee pay.
Penalties for intentional underpayment
Companies found to have deliberately underpaid employee wages will face penalties under the Fair Work Act of up to 3 times the amount of the underpayment or $7.825 million, whichever is greater (or $7.825 million if the court can’t determine the underpayment).
Individuals will face up to 10 years in prison and fines of up to 3 times the amount of the underpayment or $1.565 million, whichever is greater (or $1.565 million if the court can’t determine the underpayment).
Modern award changes from 1 January 2025
Introductory levels
Some awards have introductory or entry-level classifications that are, at times, less than the National Minimum Wage. In some instances, these classifications are temporary and in other cases they’re not.
In 2024, the Fair Work Commission conducted a review and decided to implement changes to introductory classifications.
Firstly, introductory classifications in awards can only apply for a limited time. The maximum time limit varies between awards but is never longer than 6 months.
Some awards allow an employee to progress to the next classification before they’ve reached the maximum time limit for the introductory classification. This may be based on the employee demonstrating their competency or achieving a required qualification. Employees will generally move to a higher classification based on what happens first.
In addition, employees who are in an introductory classification but have already surpassed their maximum time limit on the classification (for example, six months), must progress to the next classification.
The changes for most awards started on 1 January 2025, and from 1 April 2025 for the Horticulture Award.
The FWO website has more information and a list of affected awards.
Changes to aged care awards
Following an Aged Care Work Value Case by the Fair Work Commission, there are changes to classifications and minimum pay rates for some aged care employees.
This changes affect these awards:
- Aged Care Award - employees undertaking ‘direct care’.
- Nurses Award - nursing assistants working in the aged care sector (these employees are now covered by the Aged Care Award).
- Social, Community, Home Care and Disability Services Award (SCHADS) - home care workers.
The Aged Care Award now contains a ‘direct care’ schedule with tables to help identify an employee’s new classification, including the reclassification of direct care employees covered by the Aged Care Award and nursing assistants from the Nurses Award.
Minimum pay rates for these workers have also increased from 1 January 2025. Increases depend on the award that covers the employee and their classification.
The amount of the increase and when it starts can differ and some employees will receive a further increase on 1 October 2025.
For general workers covered by the Aged Care Award, the increase is 3%.
For direct care employees, how the increase is applied depends on the size of the increase. These employees include:
- Direct care workers in the Aged Care Award (including nursing assistants previously covered by the Nurses Award).
- Home care employees – Aged care in the SCHADS Award, including nursing assistants previously covered by the Nurses Award.
The Fair Work Commission's final determinations have more information about the new minimum rates for each classification:
