As of 1 January 2025, intentional underpayment of wages is a criminal offence in Australia. The new laws, introduced under the Fair Work Act 2009 (Cth), significantly raise the stakes for employers who deliberately fail to pay employees their lawful entitlements—including wages, superannuation, paid leave and other benefits.

What Constitutes Wage Theft?

A person or company may commit a wage theft offence if they:

• Are legally required to pay an amount under the Fair Work Act, an award, enterprise agreement, or Fair Work Commission order;
• Fail to pay the full amount by the due date; and
• Do so intentionally—not as a result of accident, oversight, or genuine error.

It’s not just about intentional conduct. If an employer becomes aware of an underpayment and fails to fix it within a reasonable timeframe—or continues to process incorrect payments despite knowing of the issue—they risk breaching the law.

Criminal Penalties

The penalties are substantial:

• Individuals: Up to 10 years in prison, a fine of up to ~$1.65 million (or three times the underpaid amount), or both;
• Companies: Fines of up to ~$8.25 million, or three times the amount underpaid, whichever is greater.

Criminal proceedings can be commenced within six years of the underpayment, but the offence only applies to conduct occurring from 1 January 2025 onward.

Civil Penalties Also Apply

Civil penalties for underpayments have also increased, especially for non-small business employers—even where the breach was accidental. These apply in addition to any criminal proceedings.

Investigations and Enforcement

The Fair Work Ombudsman (FWO) has broad investigative powers and can refer matters to the Commonwealth Director of Public Prosecutions and the Australian Federal Police for prosecution.

Employers who admit to intentional underpayments may avoid criminal prosecution by entering into a Cooperation Agreement with the FWO. However, this does not prevent civil penalties or other enforcement actions.

Are There Exceptions?

Some employers and entitlements are excluded from the criminal provisions. For example, underpayments relating to superannuation and long service leave by sole traders, partnerships, and other unincorporated entities in South Australia are not currently subject to the criminal offence provisions. However, civil penalties may still apply.

Key Actions for Employers

To ensure compliance, employers should:

• Audit payroll systems and ensure correct application of awards and agreements;
• Review employee classifications to confirm appropriate pay rates;
• Seek legal advice if unsure whether certain entitlements apply;
• For small businesses, refer to the Voluntary Small Business Wage Compliance Code on the FWO website.

Key Considerations for Employees

If you suspect you’ve been underpaid or misclassified:

• Gather payslips, contracts, and any correspondence;
• Check against award conditions or enterprise agreements; and
• Seek legal advice to understand your options.

Final Thoughts

This legislation sends a clear message—intentional wage underpayments will not be tolerated. Whether you’re an employer or employee, it’s critical to know your rights and responsibilities.

For tailored legal advice, contact Brenton Priestley or Sinisa Popovic.

This article is general in nature and does not constitute legal advice.