Wage Theft Penalties in Australia: What Underpaying Employees Could Cost You

A Comprehensive Guide for Employers – by Atlas Lawyers (Employment Law Specialists)

Underpaying employees is no longer just a civil compliance issue in Australia — deliberate wage theft can now trigger serious criminal and civil consequences for employers. With reforms that commenced on 1 January 2025, the landscape of employment law has shifted significantly, placing greater accountability on businesses and directors to ensure proper wage compliance. This guide breaks down what wage theft is, how penalties are applied, and what employers must do to protect their business.

What Is Wage Theft?

In Australia, wage theft refers to the intentional underpayment of wages or employee entitlements, including:

• Minimum wages
• Penalty rates (overtime, weekends, public holidays)
• Allowances and loadings
• Leave entitlements
• Other payments due under awards, enterprise agreements, or the Fair Work Act

Importantly, only intentional underpayments qualify as criminal wage theft — honest mistakes or inadvertent payroll errors that are genuinely accidental and quickly rectified generally do not attract criminal liability.

Criminal Penalties: Severe Consequences for Intentional Underpayment

From 1 January 2025, employers found to have intentionally underpaid employees can face criminal prosecution, with penalties that reflect the seriousness of the offence:

 For Companies (Body Corporates)

• Fines up to the greater of:
  • 3 × the amount underpaid (if it can be determined), or
  • $8.25 million
• If the underpayment amount can’t be ascertained, the maximum fine is $8.25 million.

 For Individuals (Directors, Employers, Officers)

• Imprisonment: Up to 10 years
• Fines: The greater of:
  • 3 × the underpayment amount, or
  • $1.65 million
• If the amount underpaid cannot be precisely determined, the fine is capped at $1.65 million.

These penalties are designed to deter intentional misconduct, not penalise employers for rectifiable mistakes. The prosecution must demonstrate intentional conduct — that the employer knowingly or recklessly underpaid employees.

Civil Penalties: Still Significant Without Criminal Intent

Not all underpayments will result in criminal charges — employers may still face civil penalties even where intent is not established:

📍 Civil Penalty Framework

• Courts may impose penalties under the Fair Work Act for contraventions involving underpayments.
• For serious contraventions (e.g., knowing or reckless underpayment), penalties for non-small business employers can include:
  • Up to 3 × the value of the underpayment or a set penalty unit amount, whichever is greater.

Civil penalties typically arise where underpayments are due to oversight or systemic errors, but nonetheless reflect a breach of workplace laws.

Small Business Considerations

The Fair Work Ombudsman has introduced the Voluntary Small Business Wage Compliance Code to provide regulatory flexibility for small employers (usually those with 15 or fewer employees):

• If a small business can demonstrate compliance with this Code — including proactive wage audits and clear payroll processes — it cannot be referred for criminal prosecution for wage theft.

However, civil remedies and compliance actions can still apply, so businesses must ensure salary and wage compliance even if they fall under this category.

Enforcement and Proceedings

• The Fair Work Ombudsman (FWO) investigates wage theft and can refer cases to the Commonwealth Director of Public Prosecutions (CDPP) or the Australian Federal Police (AFP).
• Prosecutions must generally be commenced within 6 years of the offence.
• Courts may order:
  • Back payment of wages and entitlements
  • Interest on unpaid amounts
  • Fines, imprisonment, or both for individuals
  • Civil penalties and compliance orders

Real-World Case Examples

While criminal prosecutions under the new regime are still emerging, enforcement through civil penalties continues:

• Employers have faced substancial fines and compensation orders in cases where they failed to pay correct wages, overtime or entitlements.
• Courts have ordered businesses to repay underpaid wages and interest, alongside monetary penalties.
• Large-scale underpayments can amount to millions in owed wages and costly litigation outcomes.

How Atlas Lawyers Can Help Employers

Ensuring compliance with Australia’s complex wage and employment laws is critical to protecting your business. At Atlas Lawyers (Employment Law Specialists), we provide strategic legal services including:

• Wage compliance audits and risk assessments
• Advice on meeting award, modern award and enterprise agreement obligations
• Representation in FWO investigations and litigation
• Assistance with internal payroll frameworks and corrective action plans
• Guidance on the Small Business Wage Compliance Code

Proactive legal support can make the difference between resolving an inadvertent error and facing potentially severe penalties.

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Key Takeaways

Issue	Penalty Risk
Deliberate underpayment (criminal wage theft)	Up to 10 years’ jail, fines up to $8.25m (company) / $1.65m (individual)
Civil underpayment contraventions	Monetary penalties based on underpayment value and seriousness
Small business non-intentional underpayment	Compliance obligations remain — criminal prosecution avoided if Code met
Failure to remedy mistakes	Significant civil penalties and compliance actions

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Final Thought

Wage theft laws in Australia are now among the strictest in the world. Employers must ensure payroll systems and compliance processes are robust, transparent, and aligned with the Fair Work Act. Intentional underpayment isn’t just a regulatory breach — it’s a criminal offence that could cost businesses millions and put directors behind bars.

If you have doubts about your wage compliance, speak to Atlas Lawyers today, expert legal advice can save your business from unnecessary risk.