What are the Penalties for Wage Theft in Australia?

In Short

• From 1 January 2025, an employer that intentionally underpays wages or entitlements owed to an employee may be committing a criminal offence;
• The Fair Work Ombudsman can now investigate suspected underpayment offences and refer matters for prosecution by federal bodies;
• In addition to criminal prosecution, businesses and individuals can face significant monetary penalties;
• To avoid unintentional underpayments, businesses should implement robust payroll systems, conduct regular audits, seek legal advice, and maintain accurate records of employee entitlements.

Tips for Businesses

Ensure your payroll processes are accurate and up-to-date to prevent wage theft. Regular audits and legal consultations can help maintain compliance. Keeping detailed records of employee entitlements is essential for transparency and legal adherence.

Summarise with: ChatGPT Perplexity Microsoft Copilot

---

Table of Contents

• What is Wage Theft?
• Closing Loopholes Changes 
• Enforcement and Penalties
• How to Avoid Wage Theft
• Key Takeaways
• Frequently Asked Questions

The concept of wage theft is becoming increasingly prevalent in Australia. Employers such as the Commonwealth Bank of Australia, ABC and McDonalds have been under heat for underpaying their staff. Governments are constantly seeking solutions to this issue due to its prevalence. As an employer, you must be vigilant to ensure your business is not underpaying your staff. Moreover, you also need to stay on top of changes to the law regarding wage theft.

This article will cover the:

• meaning of wage theft;
• changes to the law criminalising wage theft across Australia;
• enforcement and penalties for non-compliance; and 
• best practice for avoiding underpayments.

What is Wage Theft?

The term wage theft refers to employers underpaying their employees, thus stealing from them. Wage theft, however, is not always malicious and can happen by mistake. In this sense, wage theft can take two forms: deliberate theft and accidental theft. Australian law now clearly distinguishes deliberate and accidental wage theft, with the former amounting to a criminal offence and attracting significant penalties.

Closing Loopholes Changes 

The Closing Loopholes amendments to the Fair Work Act 2009 introduced a criminal offence for intentional underpayment of employees’ wages and certain entitlements. Under the new laws, which commenced on 1 January 2025, an employer may commit a criminal offence where they:

• were required to pay an amount to or on behalf of an employee under the Fair Work Act, a modern award, enterprise agreement or other relevant legislations (e.g. wages, allowances, paid leave or superannuation); and 
• intentionally did or failed to do something which resulted in those amounts not being paid to an employee on or before the day they became due. 

An employer can be a company or individual, and third parties involved in or who aid in violating wage theft laws can also be criminally prosecuted. 

Enforcement and Penalties

The Fair Work Ombudsman (FWO) has powers to investigate alleged wage theft and may refer matters to the Commonwealth Director of Public Prosecutions or the Australian Federal Police for prosecution where there is sufficient evidence of intentional non-compliance. 

Employers prosecuted for wage theft offences may face: 

• a maximum of 10 years’ imprisonment; and/or
• a maximum monetary fine, being the greater of:
  • 3 times the underpayment amount (if this can be ascertained); or 
  • $1.585 million for an individual and $7.825 million for a company.

While penalties for non-compliance are significant, the new laws also introduced a ‘safe haven’ pathway for business owners to encourage self-disclosure of conduct that may amount to wage theft. One pathway includes the option for a business owner (or an individual repsonsible for the wage theft) to enter into a cooperation agreement with the FWO. Small businesses (those with less than 15 employees) may also avoid prosecution if they can demonstrate compliance with the newly established Small Business Wage Compliance Code.  

Despite the new laws commencing, the FWO can opt to issue compliance notices, compliance orders or pursue civil action for non-compliance. 

How to Avoid Wage Theft

As an employer, one of your main priorities should be correctly paying your employees their owed wages and entitlements. Before hiring staff, you should carefully consider what your minimum pay obligations are, and ensure you and your business are able to meet your legal obligations. Before hiring an employee, you should:

• familiarise yourself with the National Employment Standards under the Fair Work Act 2009; 
• research and seek advice on coverage for your employees under a modern award or an enterprise agreement; and
• implement efficient and accurate timekeeping processes, and maintain records of time worked and entitlements accrued. 

While the new laws criminalise intentional wage theft, you should take proactive steps to avoid and remedy any accidental or mistaken underpayment of your staff. This will mitigate your risk exposure to penalties and will help develop a culture of trust and transparency in your business.  

How to Prevent Wage Underpayment

Ensure your employees are paid correctly with our free guide on how to prevent wage underpayment.

Download Now

During the employment lifecycle, new compliance risks may arise as your employees become more experienced or obtain qualifications, or as minimum wages and superannuation rates increase. To avoid intentional wage theft, we recommend that you: 

1. make sure that payroll systems and processes are established correctly (including by incorporating the correct modern award or enterprise agreement where relevant) so that employee entitlements are correctly paid (and accrued);
2. obtain legal advice quarterly/annually to ensure you are paying your employees correctly;
3. ensure you are paying your employees relevant overtime, allowances and penalty rates in line with any modern award or enterprise agreement that applies to them;
4. conduct regular and systematic audits;
5. ensure to keep accurate employee entitlement records; and
6. implement salary review initiatives.

Key Takeaways

The introduction of new wage theft laws mean that it is more important than ever to ensure you are correctly paying your employees. As of January 1 2025, employers who intentionally underpay their employees may face criminal prosecution, with penalties of up to 10 years imprisonment and/or significant monetary fines. There are many ways you can proactively prevent underpayment, including:

• by seeking advice;
• familiarising yourself with your employees’ minimum entitlements;
• conducting regular audits; and
• maintaining accurate time and payment records.

If you believe you may be underpaying your staff, facing prosecution, or need help paying your employees the correct amount, our experienced employment lawyers can assist you as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions