Employment & Safety Update

1 Wage theft is now a crime. Here’s what that really means (and what to do about it)

From 1 January 2025, deliberately underpaying employees is no longer just a compliance matter that can result in underpayment claims, civil claims and penalties. It is now a criminal offence that can be prosecuted by the Fair Work Ombudsman (FWO).

Employers who make honest mistakes and quickly fix them are not likely to find themselves in the regulator’s sights. For example, a genuine misclassification error is not likely to attract attention for the purposes of wage theft laws.

But employers who deliberately and knowingly let an underpayment roll on (including certain superannuation amounts), have been warned to now expect serious consequences including criminal proceedings.

While prevention is always better than a cure in situations like this, the bottom line for employers is that if an underpayment issues surfaces, it must be taken seriously. Address it, document it, and quickly get advice on the best engagement path with the FWO if you receive a notice.

2 What is “wage theft”?

If an employer (a person or a company) intentionally does something that means an employee isn’t paid their lawful entitlements in full and on time, that’s wage theft under the Fair Work Act.

This applies to all lawful National Employment Standards, Award and Enterprise Agreement entitlements, like base rates, penalty rates, overtime, allowances—and in some cases it can apply to superannuation under the Federal scheme.

It does not need to be a single act, but can cover a “course of conduct” involving multiple acts. If multiple acts contribute to an employer’s failure to pay, the prosecution need only show that the overall conduct was intentional, rather than proving criminal intent for each act. It will be enough to show that the course of conduct was meant to avoid paying the employee.

Intention is key here. Honest mistakes are not likely to be caught. But if, for example, an employer does not adjust an employee’s wages according to a change in classification, or Award rate increase, it might be intentional if it can be shown that the employer knew of the requirement to increase the pay.

Conduct may also be attributed to a company, rather than an individual, when it is carried out by an employee, agent, or officer acting within the actual or apparent scope of their employment.

Where there are complaints, or other evidence of intentional underpayments, the FWO may choose to investigate, and depending on the evidence, may refer cases to the Commonwealth Director of Public Prosecution for prosecution.

3 What are the stakes?

For individuals, the maximum penalties are up to ten years’ jail and up to about $1.65m in fines, or three times the value of the underpayment, whichever is greater.

For companies, the fines can reach the greater of:

• three times the underpayment; or
• up to 25,000 penalty units (currently, about $8.25m).

In other words, if the quantum of the shortfall is big enough, the fines exposure will increase proportionally and can essentially be “unlimited”.

Civil penalties have also increased for underpayments— so even when there is an unintentional non-compliance, the consequences can be significant. Maximum civil penalty amounts can be up to:

• for an individual:
  • $19,800 per contravention
  • $198,000 per contravention for some ‘serious contraventions’
• for a company with less than 15 employees:
  • $99,000 per contravention
  • $990,000 per contravention for some ‘serious contraventions’
• for a company with 15 or more employees:
  • $495,000, or for contraventions relating to an underpayment, the greater of $495,000 or three times the underpayment amount per contravention.
  • $4,950,000, or for contraventions relating to an underpayment, the greater of $4,950,000 or three times the underpayment amount per contravention for some ‘serious contraventions’.

4 Quick, practical steps to avoid issues

Whatever your industry or size, employers can take some straightforward steps to stay ahead of the regulatory obligations:

• Check coverage and classifications. Have a clear understanding of which awards/enterprise agreements apply. Are your classifications, loadings and penalty triggers right for each role (including casuals)?
• Audit pay and superannuation records. Reconcile base rates, penalties, overtime, allowances, leave, and superannuation. If you find gaps, promptly calculate, pay and document any rectification measures taken. Make sure to include your annualised salary employees here as well, to make sure that the annual salary meets or exceeds their lawful entitlements.
• Review and update pay and record keeping systems. Actively and periodically review your working records, rostering and payroll systems. Implement automatic alerts for award changes and allowance triggers.
• Ensure governance oversight. Make sure that wage compliance is on the Board (or applicable committee) agenda. Require quarterly reports on any non-compliances, like late superannuation payments, accrued but unpaid overtime, or negative leave balances.
• Small business employers can use the Fair Work Ombudsman’s Voluntary Small Business Wage Compliance Code pathway (which can be seen here). Although the Compliance Code strictly applies to small business employers, it sets out some useful and practical principles that are applicable no matter what business and will assist with compliance.
• Seek advice early and consider cooperation. If you uncover issues, get advice before self‑reporting.