Wage theft is now a crime in Australia — what counts and what to do

From 1 January 2025, intentionally underpaying an employee is a criminal offence under section 327A of the Fair Work Act 2009.

Penalties for individuals: up to 10 years' imprisonment and the greater of $1.65 million or three times the underpayment amount. For corporations: up to $8.25 million or three times the underpayment, whichever is greater.

This sits alongside the existing civil penalty regime — which still applies to unintentional underpayment — but adds personal criminal liability for directors and managers who deliberately underpay.

The criminal offence requires the employer to have intentionally engaged in conduct that resulted in the underpayment. The intent attaches to the conduct (the act of paying less than required), not necessarily to the underlying breach of the Fair Work Act.

What this means in practice:

• Honest mistakes are NOT criminal. Misreading an award, wrong classification, payroll software error — these stay civil.
• Knowing-the-rate-is-wrong-and-paying-it-anyway IS criminal. An employer who's been told by the FWO their rate is wrong and continues paying it.
• Cash-in-hand to dodge tax/super would generally be intentional under the new regime if it's being done to avoid the legal entitlement.
• Deliberately misclassifying employees as contractors or as a lower award classification is intentional.

The criminal offence covers the same set of "amounts" the FW Act has always required:

• Wages (base + penalty + overtime + allowances)
• Superannuation contributions
• Annual leave, personal leave, long service leave, and parental leave payments
• Redundancy pay
• Casual loading
• Leave loading

An employer who pays full base wages but skips super contributions is committing wage theft. Same for an employer who pays the wages on time but withholds the redundancy entitlement at termination.

If you're a small-business employer (fewer than 15 employees), there's a Voluntary Small Business Wage Compliance Code. Employers who comply with the Code cannot be referred for criminal prosecution for unintentional underpayments. The Code requires reasonable steps to:

• Determine the correct award and classification.
• Use the correct rates and apply them consistently.
• Respond promptly when an underpayment is identified.
• Keep records of pay calculations.

Small business employers who self-identify an underpayment, calculate the correct amount, and back-pay promptly are protected by the Code. This is real protection — but it requires real effort.

For employers of any size who realise they have an intentional underpayment problem, the FW Act provides a cooperation agreement mechanism (section 327B). Self-report to the FWO, agree to a remediation plan and full back-pay, and the FWO will not refer the matter for criminal prosecution.

The cooperation agreement is real teeth-disarming if used genuinely and early. It does not protect against civil penalties, but it does protect from prison.

Order of operations:

1. Calculate the underpayment. Use our Back Pay Calculator with your actual hours and the correct award rate. Document every variance.
2. Raise it in writing. Use our Underpayment Enquiry Letter. Many employers fix on first contact when faced with a documented claim.
3. If they refuse or delay, escalate to the FWO on 13 13 94 or via fairwork.gov.au. The FWO will investigate for free.
4. For deliberate, large-scale underpayment, you can refer the matter directly to police as a criminal complaint, though most cases are run via the FWO who has the technical expertise to investigate.

For the right path for your specific situation, ask FairWork Mate AI — it'll cite the relevant section and recent FWC/FCA cases.

If you have any payroll responsibility:

1. Run an audit. Check current rates against the relevant Modern Award for every employee. Misclassification is the most common silent breach.
2. Document your decision-making. If you're a small business, demonstrating compliance with the Code is the safe harbour.
3. Fix anything you find. Calculate the back pay, pay it, document it. The cooperation agreement is far cheaper than the prosecution.
4. Get a second opinion. A workplace lawyer is around $300-500/hour for an audit. FairWork Mate AI for Business is $499/month and reads every FWC decision daily.