New Laws Criminalising Intentional Wage Underpayments: What Employers Need to Know
From 1 January 2025, intentional underpayment of wages or entitlements will become a criminal offence in Australia. Importantly, these laws target deliberate actions—not honest mistakes. Here’s what employers need to know about the changes and their implications.
What Constitutes a Criminal Offence?
An employer may be found guilty of a criminal offence if they:
Were required to pay amounts such as:
Wages or paid leave entitlements to an employee.
Contributions on behalf of the employee or for their benefit, such as superannuation or salary sacrifice arrangements.
Intentionally engaged in conduct that results in these amounts not being paid on or before the due date.
This offence applies only to intentional underpayments occurring after the provisions come into effect. It can also include conduct that began prior to 1 January 2025 but continued after the new laws commence.
Both individuals and companies can be prosecuted under these laws.
Enforcement and Penalties
The Fair Work Ombudsman (FWO) will:
Investigate suspected cases of criminal underpayment.
Refer matters to the Commonwealth Director of Public Prosecutions (CDPP) or the Australian Federal Police (AFP) for potential criminal proceedings.
Penalties for convicted offenders may include:
Monetary fines.
Imprisonment.
Both fines and imprisonment.
The decision to refer a matter for prosecution depends on the availability of evidence and whether it serves the public interest, as outlined in the FWO’s Compliance and Enforcement Policy.
Exceptions to the Law
The criminal provisions do not apply in cases of underpayment related to:
Superannuation contributions.
Long service leave payments.
Leave connected to being the victim of a crime.
Leave for jury duty or emergency service duties.
For detailed rules and penalties, refer to the section on Criminal Prosecution.
Cooperation Agreements
Employers who voluntarily disclose conduct that may constitute a criminal offence can apply for a cooperation agreement.
A cooperation agreement prevents the FWO from referring specified conduct for criminal prosecution.
However, the FWO may still pursue other enforcement actions, such as civil litigation.
Voluntary Small Business Wage Compliance Code
Small businesses have additional safeguards under the Voluntary Small Business Wage Compliance Code.
If a small business employer underpays an employee and complies with the Code, the FWO cannot refer them for criminal prosecution.
Increased Civil Penalties for Wage Underpayments
From 1 January 2025, civil penalties for underpayment violations will increase significantly for non-small business employers. Courts can impose penalties of:
Up to three times the value of the underpayment, or
The relevant penalty unit amount, whichever is higher.
Serious Contraventions and Civil Penalties
Changes to civil penalty laws, which started on 27 February 2024, include:
Doubling maximum penalties for non-compliance with compliance notices.
Increasing penalties by five times for specific civil remedy contraventions by businesses with 15 or more employees.
Selected civil remedy contraventions include breaches of:
The National Employment Standards.
Award and agreement obligations.
Pay slip and record-keeping requirements.
Compliance notice obligations.
The threshold for a serious contravention has also changed. Previously, serious contraventions required knowing and systematic breaches. Under the new laws, serious contraventions now include breaches that are knowing or reckless.
The FWO has updated its guidance on Workplace Investigations and Litigation to reflect these changes.
What This Means for Employers
These new laws signal a significant shift in the regulatory landscape for Australian employers. Intentional underpayment of employees can now result in criminal charges, hefty fines, and even imprisonment. Employers must ensure compliance with workplace laws to avoid severe consequences.
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