4 minute read

Wage compliance is no longer just a payroll issue, it’s a legal risk.

From 2025, intentional underpayment of wages can result in criminal penalties, and small businesses are not exempt.

To help small businesses, the government has introduced the Voluntary Small Business Wage Compliance Code. The Code applies to small businesses with fewer than 15 employees. It outlines what the Fair Work Ombudsman considers when deciding whether a business has made a genuine effort to pay employees correctly.

If you follow the Code and make a mistake, you may avoid criminal prosecution. However, you will still need to fix any underpayments and may face other penalties.

Why This Matters

Most small and medium businesses operate in fast-paced environments where payroll is not always straightforward. Different pay rates, overtime, allowances and changing work patterns can all increase the risk of errors. Because of this, Fair Work expects businesses to be actively managing wage compliance, not just reacting when something goes wrong. Simply not knowing is no longer enough.

With 1 July approaching, this becomes even more important. Updated minimum pay rates will soon come into effect, and businesses are expected to review and implement these changes correctly. For Full Circle Members, this is a supported process. You’ll be prompted to review updated minimum hourly rates and ensure your payroll settings remain compliant.

What This Looks Like in Practice

Following the Code and associated Guide demonstrates you are making a genuine effort to pay your people correctly. In practice, this means:

• Understanding your pay obligations across modern awards, enterprise or collective agreements, and minimum wage requirements
• Keeping up with changes to pay rates, allowances, and conditions
• Ensuring employees are correctly classified based on their actual duties
• Maintaining accurate records of hours worked and entitlements
• Regularly reviewing payroll outcomes, not just settings

It’s also important to review salaried arrangements. Recent Federal Court scrutiny involving a major national employer has reinforced that employees must receive their full entitlements in each pay period, rather than relying on averaging over longer cycles. This means businesses need to ensure salaried employees are consistently better off overall and that arrangements are carefully structured and regularly reviewed. If an issue is identified, the expectation is that you act quickly, correct the error, back-pay where required, and implement steps to prevent it from happening again.

What the Code Requires

The Code looks at the overall behaviour of the business and whether reasonable steps were taken. From both the legislation and Fair Work guidance, this comes down to a few key expectations:

• You’ve taken steps to work out the correct pay: This includes checking awards, agreements, or minimum wage requirements.
• You’ve tried to stay up to date: Pay rates, allowances and rules change regularly and businesses are expected to keep up.
• You rely on accurate information: This includes employee roles, duties, hours, and classifications.
• You seek advice when needed: This could be from Fair Work, an HR provider, or a professional advisor.
• You fix issues quickly if something goes wrong:  Including back-paying employees and improving your systems.
• You cooperate if there is a review or investigation: How you respond matters just as much as the issue itself.

While the Code itself is not a checklist, the accompanying Guide to Paying Employees Correctly and the Voluntary Small Business Wage Compliance Code includes a practical checklist to help you answer the question: “How can I ensure I am paying my employees correctly?”

This concise 10-page guide provides key information, including:

• An overview of the criminal offence and potential consequences of non-compliance
• An explanation of the Code and how to access it
• Steps to confirm you are paying employees correctly and maintaining ongoing compliance
• Guidance on taking appropriate corrective action if issues arise
• Helpful real-world examples to support understanding and application.

Your Next Step

If you are a small or medium business, now is the time to check where you stand:

• Read the Guide to Paying Employees correctly and the Voluntary Small Business Wage Compliance Code
• Review how you are currently paying your staff
• Check Awards, classifications and pay rates
• Look for any gaps or areas you are unsure about
• Fix any issues as soon as possible
• Put simple systems in place to avoid future mistakes

How We Can Help

For Full Circle members, upcoming 1 July pay rate updates are supported as part of your membership, ensuring you stay aligned with minimum wage changes.

Beyond this, Full Circle HR can conduct a broader Wages and Conditions Review and Remedy, identifying risks, correcting issues, and helping you implement compliant systems. This includes a review of:

• Award and agreement coverage
• Classification accuracy
• Overtime and penalty treatment
• Salaried arrangements and risk areas

This proactive approach not only supports compliance but provides peace of mind that your workforce is being paid correctly.

If you’d like support, get in touch at hello@fullcirclehr.com.au to get started.