Find out what these reforms mean and how to prevent non-compliance.
As of 1 January 2025, it is a criminal offence to intentionally underpay staff wages or entitlements. The maximum fine can be either three times the amount of underpayment or up to $1.65 million for individuals and up to $8.25 million for companies (whichever is higher). Individuals could also face up to 10 years in prison. With such penalties now in place, it’s essential for beauty business owners to understand how these new reforms could impact them.
“Intentional underpayment, or wage theft, happens when an employer knowingly fails to pay an employee their full legal entitlements under the Fair Work Act,” says Jessy Warn, Managing Partner at HR Gurus. In the beauty services industry, this relates to the Hair and Beauty Industry Award 2020. “This includes paying below the minimum wage or award rates, failing to pay penalty rates or overtime, withholding superannuation, or paying employees in cash without proper records to avoid tax and entitlements.”
Crucially, it differs from honest or genuine mistakes. Jessy explains that payroll miscalculations, misinterpreting an award, misinterpreting casual versus part-time entitlements, or administrative errors can happen. However, they should be corrected quickly to avoid potential compliance issues.
“If a staff member raises concerns about underpayment, business owners should take it seriously, check the records, and be transparent,” she explains. “If an error has occurred, fixing it immediately and maintaining open communication with the employee is the best way to prevent further issues. Ignoring complaints or becoming defensive can escalate the situation, leading to legal action, financial penalties, and reputational damage.”
Jessy notes that wage theft in the beauty services industry often occurs as flat rates that don’t include penalty rates, misclassifying staff as independent contractors, failing to pay for training or preparation time, not recognising overtime, or withholding commissions or tips.
“While some of these may be deliberate cost-cutting measures, others are simply due to a lack of awareness of award conditions,” Jessy says, “But the key difference is that genuine mistakes are fixed quickly once identified.”
She recommends business owners use Fair Work’s Pay Calculator to verify pay rates, and keep detailed records of rosters, timesheets, payslips, and superannuation contributions. She also suggests seeking professional human resources or payroll advice and conducting regular payroll audits.
For added peace of mind, small business owners can participate in the Voluntary Small Business Wage Compliance Code. It provides a framework for businesses to follow, so they can demonstrate an active commitment to complying with wage laws. Although it doesn’t exempt a business from penalties if they are found to be intentionally underpaying staff, complying with the Code (to Fair Work’s satisfaction) may prevent criminal prosecution, should an issue arise.
“The crackdown on underpayment has been driven by widespread corporate scandals, but small businesses are not immune,” Jessy reiterates. “The penalties highlight how seriously the government is taking wage compliance, making it crucial for businesses to stay on top of their obligations.”
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