For employers
Found an underpayment: fixing it, self-disclosure, and the criminal wage theft line
A payroll review, a new bookkeeper or an employee's question has turned up a shortfall: the wrong classification, missed penalties, an outdated rate. Every employer's instinct is to quietly fix it going forward. The law expects more than that, and since 1 January 2025 the distinction between a mistake and a deliberate underpayment has criminal consequences. This page sets out what to do in what order, what the exposure is, and when the first call should be to a lawyer.
Updated . General information, not legal advice.
Time limits that apply
| What | Limit | Source |
|---|---|---|
| Employees' recovery period | 6 years back from the date a claim is made | Fair Work Act s 544 |
| Criminal wage theft offence | Applies to intentional underpayments from 1 January 2025; not to honest mistakes; maximum 10 years' imprisonment for an individual | Fair Work Act s 327A; Fair Work Ombudsman, criminal prosecution |
| If an employee is dismissed or penalised for raising it | 21 days for the employee to lodge a general protections application | Fair Work Act s 366 |
Do you need a lawyer for this?
Advice usually pays for itself when
- The underpayment is large, spans years, or affects many employees, and the business's ability to pay is in question.
- Anyone in the business may be seen to have known about it and let it continue, because intentional conduct after 1 January 2025 is where criminal exposure begins.
- The Fair Work Ombudsman has already made contact, or an employee has lodged a claim or gone to a union.
- You are considering self-reporting to the Ombudsman and want the disclosure framed correctly.
The free route is usually enough when
- A contained mistake, such as one employee on the wrong level for a few months, where the arithmetic is clear and the business can pay it promptly.
- You need to calculate the shortfall across a period that includes wage reviews, which the free historical rates and back pay tools handle.
What are the first steps once an underpayment is found?
Stop the bleeding: correct the rate or classification from the next pay run so the shortfall does not grow. Then scope it: which employees, which entitlements, over what period. The recovery period employees can claim is six years, so the review should go back that far. Calculate the shortfall using the rate that applied on each date, not today's rate, and include superannuation on the underpaid amounts. Keep the working papers, because they will be asked for. Do not delete, alter or backdate any record, and do not ask employees to sign anything releasing the business before the amounts are known. Everything after this point is easier if the first steps were transparent.
Where is the line between a mistake and a crime?
Since 1 January 2025, intentionally underpaying an employee has been a Commonwealth offence. It requires intentional conduct, so an error in classification, a missed rate increase or a payroll system fault is not a crime, though it is still an underpayment that must be repaid. The offence only applies to conduct after that date. The maximum for an individual is ten years' imprisonment, and fines are the greater of three times the underpayment or a fixed maximum. The practical line is knowledge. A business that learns of a shortfall and keeps paying the wrong rate has moved from mistake towards intent. That is why fixing it forward immediately, and documenting when it was discovered, matters legally and not only morally.
Should we self-report to the Ombudsman?
The Fair Work Ombudsman encourages employers to self-disclose underpayments and has mechanisms for cooperating employers, including a published compliance code for small businesses and cooperation arrangements for employers who come forward, which are described on its site. Self-disclosure does not make the back pay go away. What it changes is the enforcement posture: an employer that finds, fixes and reports a problem is treated differently from one that is caught. Whether, when and how to disclose is a judgement that depends on the size of the shortfall, how it arose and who knew. It is the single decision on this page most worth an hour of legal advice before it is made.
What is the civil exposure?
Back pay for six years with superannuation, and in court, interest. Civil penalties for the contraventions, which are set per contravention and scale with the size of the business and the seriousness of the conduct, with higher maxima for serious contraventions and for underpayments calculated by reference to the amount underpaid. FairWork Mate's underpayment exposure tool estimates the range from the published enforcement record. Enforceable undertakings are the Ombudsman's usual tool for cooperating employers, and they typically involve repayment, an apology, external audits and a contrition payment rather than litigation. Employees who raise underpayments are protected from adverse action, so any change to their treatment after they speak up becomes a separate claim.
When does a lawyer pay for itself?
Before self-disclosure, so the disclosure says what it needs to and nothing it should not. Whenever anyone in the business could be characterised as having known, because the criminal line is about intent and the advice is about protecting people as well as the company. When the amounts threaten the business's solvency, because sequencing repayment, dealing with the Ombudsman and managing employees at the same time is delicate. And when the Ombudsman is already involved. Liquid Employment Lawyers is FairWork Mate's paid legal partner for employers. It is an Australian employment law firm, not free government help, and it explains scope and fees before any work. A contained, clearly accidental shortfall repaid promptly does not need a lawyer.
What is the free route for employers?
The Fair Work Ombudsman on 13 13 94 helps employers work out the correct rates and explains the self-disclosure process, free. FairWork Mate's historical pay rates tool holds the rate that applied on every date, the back pay calculator does the arithmetic, the award compliance audit checks classifications, and the underpayment exposure tool and enforceable undertaking guide explain the enforcement side in general terms. Free general information, not legal advice. FairWork Mate is not affiliated with the Fair Work Commission or the Ombudsman.
Free FairWork Mate tools for this
Talk to Liquid Employment Lawyers about this
Share a few details and their team will be in touch to talk it through. No obligation, and you decide whether to go further after that first conversation.
Liquid Employment Lawyers is an Australian employment law firm and FairWork Mate's paid referral partner, not free Fair Work advice. They discuss scope and any fees with you directly. FairWork Mate is not affiliated with the Fair Work Commission or the Fair Work Ombudsman. For free general guidance, use the tools above or call the Fair Work Ombudsman on 13 13 94.
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Common questions
We only found the error last month but it goes back years. Is that a crime?
No. The criminal offence requires intentional conduct and applies only to conduct after 1 January 2025. A historic mistake discovered now is a civil underpayment. Continuing to underpay after you know is where the risk changes.
Do we have to go back six years?
Employees can claim six years back, so a review that stops short leaves the business exposed for the rest. Most employers who self-disclose repay the full period the shortfall existed.
Can we pay it back in instalments?
Employees can agree to a repayment plan, and the Ombudsman's cooperation arrangements often provide for one where the amounts are large. Any agreement should be in writing and should not ask employees to give up their rights in exchange.
Is Liquid Employment Lawyers free?
No. It is an Australian employment law firm and FairWork Mate's paid referral partner. Enquiring is free and there is no obligation. The Fair Work Ombudsman on 13 13 94 helps employers with rates and self-disclosure at no cost.
Official sources
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General information and estimates only — not legal, financial or tax advice. Always check your specific award, agreement or contract, or a qualified professional, before you rely on the result.
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