Proactive compliance in a new era of wage theft prevention

Proposed legislation will create an unprecedented shift in workplace regulations. Proactive compliance is a director’s shield in this evolving regulatory landscape. 

The proposed Fair Work Legislation Amendment (Closing Loopholes) Bill 2023, now before parliament, will criminalise wage theft for intentional employee underpayments. This offence will carry penalties of up to 10 years in prison and fines up to $1,565,000 for individuals and $7,825,000 for corporations, or three times the value of the underpayment — whichever is higher. For civil provisions, serious contraventions now cover recklessness as well as intentional acts, with the maximum fine increasing to $939,000, or three times the underpaid amount if it exceeds the cap. These proposed reforms are prompting directors to think ahead about compliance strategies to avoid penalties resulting from honest mistakes or ignorance.

Workforce compliance tech company Yellow Canary has invested $15 million in its platform to provide automated insights into payroll variances, so repayments can be made before larger issues compound. Directors and C-suite executives can rapidly access relevant data to make decisions in the best interests of shareholders, employees and the company, financially and reputationally.

“Implementing control mechanisms to rapidly identify, quantify and fix underpayments and give boards visibility could be the differentiator between an honest mistake and potential criminal liability,” says Marcus Zeltzer, MD and co-founder of Yellow Canary. “Demonstrating due diligence is the tangible proof that intentions are legitimate in this heightened era of enforcement.”

Outdated processes and systems are the primary driver of underpayments, yet employers typically address underpayments with reactive, expensive and time-consuming remediation projects. These often rely on human intervention and spread- sheets, fuelling the core issue and increasing the risk of underpayments. The approach to compliance must shift from reactive to proactive. 

“Step one, your internal teams must communicate,” says Zeltzer. “There is no one logical owner of payroll compliance in any business. Payroll operations, workforce planning, technology and legal teams all play a part. They must know the impact each of their business decisions have on compliance, which takes collaboration.”

“Step two, shift your compliance framework to a two-way approach. Payroll isn’t a one-way street, but commonly the function is designed only to get payments out to employees. Continually reviewing outputs will catch any underpayments before they exacerbate, and resolve systemic issues.”