In this article
From 1 January 2025, getting pay wrong can be more than a civil claim. Intentional underpayment is now a criminal offence, with jail time and very large fines on the table.
Most employers want to do the right thing. The hard part is that awards are complex and easy to misread. Here is the offence, the penalties, and how to protect your business.
Key takeaways
- Intentional underpayment is a criminal offence under section 372A of the Fair Work Act from 1 January 2025.
- It targets intentional conduct, not honest mistakes, but award complexity can make "mistake" hard to establish.
- Penalties reach 10 years imprisonment and multi-million dollar fines.
- Small business employers who follow the Voluntary Small Business Wage Compliance Code will not be referred for prosecution.
- A culture of proactive compliance, and a regular underpayment audit, are your best protection.
The criminal wage theft offence
An employer commits an offence under section 372A if it is required to pay an amount under the Fair Work Act or an instrument, it engages in conduct, and that conduct results in a failure to pay the amount in full by the due date. Because it is a criminal offence, the employer must have intended the conduct that led to the failure. It is not meant to catch honest mistakes. The Fair Work Ombudsman can investigate and refer matters to the Director of Public Prosecutions and the Australian Federal Police.
The penalties
For an individual, up to 10 years imprisonment and a fine of $1.65 million or three times the underpayment, whichever is greater. For a company, the greater of $8.25 million or five times the underpayment. Significant civil penalties for serious contraventions also still apply.
Ask Lawlux a question for free, any hour, and see the Australian law behind the answer.
Why the "mistake" exemption is tricky
The offence is not intended to apply to mistakes. The difficulty is that awards are often ambiguous. In our experience, well intentioned employers can be exposed where there is an unreasonable delay in fixing an underpayment, where staff are not paid in full when required, or where the Ombudsman disagrees with how an underpayment was quantified. Even government departments have underpaid their own staff.
Culture matters
Intent can be established through corporate culture, where a culture directed, encouraged or tolerated non-compliance, or where the employer failed to maintain a culture of compliance. Fostering proactive compliance is not just good practice, it is legal protection.
Protection for small business
A small business employer will not be referred for prosecution if it underpaid but complied with the Voluntary Small Business Wage Compliance Code, which turns on the underpayment not being intentional. Civil action by the Ombudsman to rectify an underpayment can still follow.
What employers should do
Build a culture of compliance and check your position:
- Resource your HR and payroll teams properly.
- Run an underpayment audit: Confirm award coverage, classifications and pay rates for each role, how time is recorded, and whether pay is set under the award, an annualised salary or a valid set-off clause.
- Keep accurate records and pay slips.
- Train managers and staff, and encourage open conversations about pay.
- If you are a small business, follow the Voluntary Small Business Wage Compliance Code.
Frequently asked questions
Does this criminalise honest mistakes?
What are the maximum penalties?
How do we protect the business?
This article is general information, not legal advice. For advice on your situation, ask Lawlux or talk to a Lawlux lawyer.
Dave is Lawlux's Managing Principal and leads the employment and industrial relations practice.
About Lawlux
Lawlux is an Australian law firm, reimagined around technology. Ask a legal question any hour and get a clear answer with the Australian law behind it, for free.
When you need more, you get fixed fee legal work and one-on-one time with an expert lawyer, backed by our professional indemnity insurance. More human, built on AI.