Voluntary Small Business Wage Compliance Code Declaration 2024

The Voluntary Small Business Wage Compliance Code Declaration 2024 is a Commonwealth legislative instrument made under subsection 327B(1) of the Fair Work Act 2009. It sets out a voluntary code for small business employers dealing with failures to pay certain employee amounts in full and on time.

The Code is aimed at one specific issue. It helps determine whether a small business employer's failure to pay an applicable amount was intentional. That matters because a small business employer may commit a criminal offence under subsection 327A(1) of the Fair Work Act if it intentionally engages in conduct that results, as intended, in a failure to pay an applicable amount in full on or before the day it is due.

The Code does not create a general payroll exemption. It provides non-exhaustive examples of the kinds of efforts, checks and information sources that may show an underpayment was not intentional. If the Fair Work Ombudsman is satisfied the employer complied with the Code in relation to the failure to pay, the Ombudsman must not refer the conduct for possible criminal prosecution under that offence provision.

The simplified outline states that, broadly, a small business employer is one that is covered by the Fair Work Act and employs fewer than 15 employees. That is the core group this Code is designed for.

In practical terms, the Code is most relevant to small employers in the national workplace relations system who pay employees under a modern award, enterprise agreement, transitional instrument or the National Employment Standards and related Fair Work Act rules. It can also matter where employee pay depends on details such as classification, age, qualifications, hours, location, overtime, allowances or annualised wage arrangements.

Businesses with 15 or more employees are usually outside this Code. So are people who do not employ anyone. The instrument is also not a general answer for every wage dispute. It only applies to failures to pay an applicable amount as defined in the instrument, which picks up amounts described in paragraph 327A(1)(a) of the Fair Work Act and excludes amounts covered by subsection 327A(2).

If you are unsure whether your business is a small business employer for this purpose, or whether the unpaid amount is an applicable amount, you should check the Fair Work Act position carefully before assuming the Code helps you.

The Code becomes relevant when a small business employer has failed to pay an applicable amount to, on behalf of, or for the benefit of, an employee. The central question is whether that failure was intentional.

The instrument says a small business employer will have complied with the Code if the failure to pay the applicable amount was not intentional, having regard to relevant matters such as those set out in the Code. Those matters include what the employer did before the underpayment happened, what information the employer relied on, what advice the employer sought, how the employer responded after becoming aware of the issue, and any other surrounding circumstances.

That means the Code is not only about what you do after discovering an underpayment. It also looks at your payroll setup, your award checking process, your record of staying current, and whether you gave accurate information when seeking advice.

The Code may become relevant in several common situations:

Section 6 of the Code says a failure by a small business employer to pay an applicable amount must not be intentional. It then lists matters that may be relevant when assessing whether the failure was intentional.

These matters are practical indicators, not a mechanical checklist. The Code says relevant matters may include whether the employer made reasonable efforts to ascertain correct rates of pay and entitlements, made reasonable efforts to stay up to date with obligations, considered and relied on employee information the employer reasonably believed was accurate, sought information or advice from reliable sources, provided information the employer reasonably believed was accurate when seeking that advice, took reasonable steps to rectify the underpayment after becoming aware of it, and cooperated with any relevant Fair Work Ombudsman inquiry or investigation.

The Code also says other circumstances may be relevant, including how the employer became aware of the underpayment. So a business should not assume that ticking one or two boxes is enough. The overall picture matters.

Importantly, the Code does not say every mistake is excused. It is directed to whether the failure was intentional. If the facts suggest a business ignored obvious risks, failed to check basic award coverage, or did nothing after being alerted to a problem, that may undermine any argument that the underpayment was unintentional.

Section 7 gives more detail on what may count as reasonable efforts to ascertain correct rates of pay and entitlements. This is one of the most important parts of the Code for day to day payroll compliance.

The instrument says relevant matters may include whether the employer referred to any modern award or other relevant instrument that applies to the employee, and whether the employer referred to any other rights relating to payment of an applicable amount under the Fair Work Act. It also points to whether the employer considered the nature of the enterprise, the employee's role and duties, and the correct classification of the employee's role.

The Code goes further and specifically mentions the need to consider minimum rates of pay, loadings or allowances, penalty rates or overtime, any other separately identifiable amounts, and any other requirements relating to rates of pay such as annualised wages or piece rates.

For a business owner, this means reasonable efforts are likely to involve more than just asking a payroll provider to process wages. You should be able to show how you identified the right industrial instrument, how you matched the employee's actual duties to the right classification, and how you checked the components of pay that apply to that employee.

Section 8 deals with staying up to date. The Code recognises that an employer can start with the right pay setup and still fall into underpayment if it does not keep current.

Relevant matters may include the employer's efforts to stay up to date with changes to applicable legislation and the interpretation of that legislation, changes to any modern award or other relevant instrument that applies to the employee, including variations made or approved by the Fair Work Commission, and changes to the employee's own circumstances.

The employee circumstances listed in the Code are practical and important: role, duties, classification, relevant qualifications, age, hours of work and location of work. Each of these can affect pay. For example, a birthday may change junior rates, a move in duties may change classification, and changed hours may affect overtime or penalties.

Businesses should read this as an ongoing compliance obligation. It is not enough to check the award once when the employee starts. You need a process for monitoring legal changes and employee changes that affect pay.

Section 9 explains what may count as reliable sources of information or advice. The list is non-exhaustive, but it gives useful guidance on where small businesses should turn when they are unsure.

The Code says reliable sources may include industrial associations of employers or employees, other relevant professional bodies, industrial professionals such as lawyers or professional industrial consultants, payroll processing services, the Fair Work Ombudsman including its website and resources, and the Fair Work Commission including its website and resources.

Just as important, section 6 says the employer should provide information it reasonably believes is accurate when seeking that advice. In practice, advice is only as good as the facts you give. If you describe the role incorrectly, leave out overtime patterns, or use the wrong classification assumptions, relying on the advice may carry less weight.

Businesses should keep records of what advice was sought, when it was sought, what facts were provided, and what response was received. That can help show the business made genuine efforts to comply.

Section 10 deals with what happens after the employer becomes aware of the failure to pay. The Code says relevant matters may include any steps taken to repay the amount, how promptly those steps were taken, and any proactive steps taken to prevent the same issues from arising in future.

The examples in the instrument are practical. Preventive steps may include seeking information or advice from reliable sources and taking steps to remedy mistakes or deficiencies in the employer's systems. So rectification is not only about paying the shortfall. It is also about fixing the cause.

Section 11 adds more context. Other relevant circumstances may include whether the underpayment arose from a payroll process mistake or a financial institution error, whether it arose because of ambiguity or competing interpretations of pay obligations and the employer took a reasonable but incorrect interpretation, how the employer became aware of the issue, how the employer responded if an employee or representative raised it, and whether the amount unpaid was minimised because the employer acted promptly.

For businesses, the message is clear: once an issue is identified, speed and substance matter. Delay, denial or a partial response can weaken the argument that the failure was unintentional.

The Code has important limits. The simplified outline makes clear that if the Fair Work Ombudsman is satisfied a small business employer complied with the Code, the Ombudsman must not refer the conduct to the Director of Public Prosecutions or the Australian Federal Police for action in relation to a possible offence under subsection 327A(1). The Ombudsman also must not enter into a cooperation agreement with the small business employer that covers that conduct.

But the instrument is equally clear that civil action may still be taken. The outline specifically refers to enforceable undertakings, compliance notices and orders for civil penalties, and notes that other civil remedies remain available. The Code therefore does not erase back pay liability or broader Fair Work Act compliance exposure.

It also does not apply to every wage issue. The underpayment must involve an applicable amount within the instrument's definition. Businesses should not assume the Code is a blanket defence against all forms of wage non-compliance.

Finally, the Code does not replace the need for proper payroll governance. It is best understood as a framework for showing genuine, documented, reasonable compliance efforts where an underpayment was not intentional.

The instrument is titled the Voluntary Small Business Wage Compliance Code Declaration 2024. It was made by the Minister for Employment and Workplace Relations on 6 December 2024 and is listed as commencing on 1 January 2025.

The instrument is in force on the Federal Register of Legislation. Businesses relying on this page should still check the current registered version and any related Fair Work Act amendments, especially if dealing with conduct close to the commencement date or after later legislative changes.

Before relying on the Code in a real underpayment situation, a business should confirm the threshold issues and gather the documents that show what happened. The Code is practical, but it is still tied closely to the Fair Work Act offence framework.