Wage Theft Is Now a Criminal Offence: 10 Years Prison for Employers (2025)
From 1 January 2025, intentional underpayment is a criminal offence carrying up to 10 years imprisonment. Learn about the new wage theft laws, penalties, enforcement, and how to report your employer.
What changed on 1 January 2025: wage theft is now a crime
On 1 January 2025, one of the most significant workplace law reforms in Australian history came into effect. New Part 3-5B of the Fair Work Act 2009, introduced by the Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024, makes intentional underpayment of employees a criminal offence. Before this date, failing to pay an employee their correct wages or entitlements was a civil matter — the employer might face a fine or be ordered to back-pay, but no one went to jail. The new provisions fundamentally change that calculus. Under s327A, a person commits an offence if they intentionally engage in conduct that results in a failure to pay an amount payable to an employee relating to the performance of work. This covers base wages, penalty rates, overtime, allowances, superannuation contributions, leave entitlements, redundancy pay, and any other monetary entitlements under the Fair Work Act, a modern award, or an enterprise agreement. The law applies to all national system employers regardless of size, though a safe harbour mechanism exists for small businesses that comply with the Voluntary Small Business Wage Compliance Code. The intent behind the reform is clear: Australia's decade-long epidemic of wage theft, which the Australian Institute of Criminology estimated costs workers up to $1.35 billion annually, demanded a deterrent with real teeth.
The penalties: up to 10 years imprisonment and $7.825 million fines
The penalties for criminal wage theft under the new provisions are severe and designed to match the seriousness of the offence. For an individual — such as a business owner, director, or manager who was personally involved in the intentional underpayment — the maximum penalty is imprisonment for up to 10 years, or a fine of up to 5,000 penalty units (currently $7,825,000 at $1,565 per penalty unit as of 2025-26), or both. For a body corporate, the maximum fine is 25,000 penalty units ($39,125,000). These are among the most severe penalties in Australian employment law and are comparable to penalties for fraud offences under the Criminal Code. The penalties are also cumulative — each employee underpaid, and potentially each pay period in which underpayment occurred, can constitute a separate offence. An employer who intentionally underpaid 50 workers over 12 months faces, in theory, hundreds of separate counts. Beyond the criminal penalties, civil remedies remain available. The Fair Work Ombudsman can still pursue civil proceedings for underpayment, and employees retain their right to recover unpaid amounts through the courts. An employee can also seek compensation for loss suffered as a result of the underpayment, including interest. The criminal and civil regimes operate in parallel, though the FWO has indicated it will generally pursue criminal proceedings only for the most serious cases of intentional conduct.
What 'intentional' means — and how it differs from honest mistakes
The critical word in the new criminal wage theft provisions is 'intentional.' Not every underpayment is a crime — the offence requires that the person intentionally engaged in conduct that resulted in the failure to pay. This is a high bar that the prosecution must prove beyond reasonable doubt (the criminal standard of proof, as opposed to the civil standard of balance of probabilities). The Explanatory Memorandum to the Closing Loopholes Act clarifies that 'intentional' means the person deliberately chose to engage in the relevant conduct knowing that it would, or would be likely to, result in underpayment. This captures scenarios such as: deliberately recording fewer hours than an employee actually worked, knowingly applying a lower pay rate than the applicable award requires, intentionally classifying an employee at a lower classification level to reduce pay, deliberately failing to pay penalty rates for weekend or public holiday work, and knowingly underpaying superannuation contributions. It does not capture: genuine payroll errors caused by system misconfiguration, honest misinterpretation of a complex award provision, underpayments arising from a bona fide dispute about the applicable award or classification, or administrative errors in recording hours. The distinction between intentional and inadvertent underpayment is where most contested cases will be fought. Employers can expect the FWO to examine internal communications, payroll records, complaints history, and whether the employer had previously been notified of the same issue.
The small business safe harbour: Voluntary Wage Compliance Code
Recognising that small businesses face particular challenges in navigating Australia's complex award system, the new provisions include a safe harbour mechanism. Under s327G, a small business employer (fewer than 15 employees) that has complied with the Voluntary Small Business Wage Compliance Code cannot be prosecuted for the criminal wage theft offence — even if underpayment occurred. The Code, published by the Fair Work Ombudsman, sets out the steps a small business should take to ensure compliance with its pay obligations. These include: regularly checking the FWO website and Pay and Conditions Tool to confirm applicable pay rates, keeping accurate records of hours worked (including start and finish times, breaks, and overtime), conducting regular pay audits against the applicable award, responding promptly to employee queries about pay, and seeking professional advice when uncertain about obligations. The safe harbour is an important acknowledgment that small business owners often lack dedicated HR or payroll expertise and may struggle to correctly interpret awards that are, by any objective standard, extraordinarily complex. However, the safe harbour is not a blanket immunity — the employer must actually demonstrate compliance with the Code. Merely being a small business is not enough. And the safe harbour only applies to the criminal offence — civil liability for underpayment remains regardless of business size. For employers of 15 or more employees, there is no safe harbour. The expectation is that larger businesses have the resources to ensure correct pay.
How to report wage theft and the FWO's new enforcement powers
The Closing Loopholes Act also enhanced the Fair Work Ombudsman's enforcement powers to support the new criminal wage theft regime. The FWO now has expanded investigative powers, including the ability to obtain search warrants for evidence of wage theft, compel the production of documents, and examine witnesses under oath. The FWO works with the Commonwealth Director of Public Prosecutions (CDPP) — the FWO investigates, and the CDPP makes the decision on whether to prosecute and conducts the prosecution. If you believe your employer is intentionally underpaying you, here is how to report it. First, gather evidence: payslips, rosters, time records, your own notes of hours worked, any communications from your employer about pay, and copies of your employment contract and the applicable award. Second, contact the FWO on 13 13 94 or lodge an online enquiry at fairwork.gov.au. You can make a complaint anonymously if you prefer, though providing your details allows the FWO to follow up and keeps you informed of progress. Third, you are protected from retaliation. Under the general protections in Part 3-1 of the Fair Work Act, an employer who takes adverse action against you because you made a complaint to the FWO faces penalties of up to $469,500 for a body corporate. This includes dismissal, demotion, rostering changes, or any other disadvantage.
Recent prosecutions and what they mean for workers
Since the criminal wage theft provisions commenced on 1 January 2025, the Fair Work Ombudsman has signalled an aggressive enforcement posture. While criminal prosecutions necessarily take time to investigate and bring to court, the FWO has reported a significant increase in wage theft complaints since the new laws commenced — a 34% increase in the first six months compared to the same period in 2024. The FWO has publicly identified priority sectors for enforcement, including fast food, retail, hospitality, horticulture, and cleaning — industries with historically high rates of non-compliance and vulnerable workforces (including migrant workers and young workers). Several investigations initiated under the old civil regime have been escalated to criminal investigations under the new provisions where evidence of intentional conduct emerged. At the state level, Victoria and Queensland already had criminal wage theft laws (Victoria since July 2021, Queensland since September 2020), and prosecutions under those regimes provide a preview. In Victoria, the Wage Inspectorate Victoria secured its first criminal conviction for wage theft in 2023, with a Melbourne restaurant owner convicted of deliberately underpaying a cook. The federal criminal regime is expected to produce its first prosecutions in 2025-26. For workers, the message is clear: intentional wage theft is no longer a cost of doing business that employers can factor in and absorb as a fine. It is a criminal offence with real consequences, and reporting it is protected. If you believe you are being intentionally underpaid, use our Underpaid Check tool and take action.
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General information and estimates only — not legal, financial, or tax advice. Always verify with the Fair Work Ombudsman (13 13 94) or a qualified professional.
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