The true cost of non-compliance

The broader consequences can go far beyond paying a fine or rectifying underpayments – it exposes directors and offices to personal liabilities, as well as reputational damage to your business and an erosion of trust and culture within your workforce.  

 We outline the implications business owners, directors or HR professionals may face when they are caught breaching the Fair Work Act.   

Financial risks

Most businesses are aware that there are financial risks associated with non-compliance of workplace laws. However, what many fail to realise is how quickly these costs can soon accumulate – from court-imposed penalties through to the backpayments – it’s rarely ever just a ‘one-off’ payment to fix a breach.   

Depending on the severity of the non-compliance, contravention, or civil breach, you may incur several costly expenses, including:  

• Infringement notices, which can be up to $1,980 per breach for an individual or $9,900 per breach for a company  

• Back payments, to rectify the issue(s)  

• If a matter is taken to court (referred to as initiating civil litigation by Fair Work) and a civil penalty is imposed, the amounts can range from $19,800 per contravention for individuals, right through to $4,950,000 for companies with 15 or more employees or beyond, for some ‘serious contraventions’.  

Legal implications  

On top of financial penalties, there can be legal implications for individuals involved in intentional underpayment of wages or entitlements as  some breaches of the Fair Work Act are deemed criminal offences.   

It’s important to note that honest mistakes aren’t considered a criminal offence, but this does not protect you from financial or reputational damage.   

Reputational damage  

Perhaps one of the biggest misconceptions about compliance is that everything will go away once the issues are rectified and any penalties imposed are paid. Unfortunately, that is not the case.  

Individuals involved in contraventions, such as owners, directors, or HR professionals, can be held personally liable – resulting in personal penalties or in some cases, imprisonment.   

Erosion of workplace culture and trust  

It’s not just the public you have to answer if you’re caught doing the wrong thing – but also your workforce. When employees discover their employer is not meeting their legal obligations, such as underpaying their wages or failing to provide certain entitlements, there is an erosion of trust.  

This can contribute to: 

• Low morale within the workplace, which may lead to reduced productivity or engagement with peers  

• High staff turnover  

• Difficulty attracting new talent, due to public reputational damage