The new Wage Theft laws and the impact on payroll overpayments

As a business owner, are you aware that how you recover accidental payroll overpayments may be considered to be wage theft under the new laws in place from 1 January 2025?  And as a result, you could personally face jail time and / or a significant personal or company fine if you recover the overpayment without proper due process.

Here is a common example I see.  A staff member is given a bonus of $5,000 inclusive of superannuation.  They should be paid $4,484 plus $516 in super.  But are paid by mistake $5,000 plus $575 in super.

The employee has been overpaid by $516 before tax. 

Now you would think, that once you identified the overpayment, and advised the employee of such, that you can simply reduce the employees pay by $516 in the next pay run(s).

But if you do this, you are in effect breaking the law and opening yourself up to issues of wage theft.

Why?  Because there are rules around taking money out of an employees pay.  And in most circumstances, the only way you can recover the payroll overpayment is if the employee agrees in writing to repay the money. 

If they don’t agree to repay the money, you as a business owner have no legal right to deduct the money from a future pay run and could be accused of wage theft.  You are just left with taking legal action to recover the money.

Another reason why every business owner needs to be on top of their payroll process to ensure accurate and timely payments and you avoid being accused of wage theft.

Contact Wayne on wayne@arealcfo.com.au or 0412 227 052.

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