Starting 1 January 2025, intentionally underpaying workers will be a criminal offence in Australia. However, this law does not apply to honest payroll mistakes made by employers.

An employer, whether an individual or a company, may face criminal charges if they:

• Are legally required to pay wages, paid leave entitlements, or other financial benefits to an employee.
• Are responsible for making payments on behalf of or for the benefit of an employee, such as superannuation contributions or salary sacrifice arrangements.
• Intentionally take actions that result in these amounts not being paid by the required deadline.

The offence applies to intentional underpayments that occur after 1 January 2025. However, if an employer has been underpaying workers before this date and continues to do so, the ongoing misconduct may still be subject to criminal prosecution.

The Fair Work Ombudsman (FWO) has the authority to:

• Investigate suspected cases of criminal wage underpayment.
• Refer cases to the Commonwealth Director of Public Prosecutions (CDPP) or the Australian Federal Police (AFP) for possible criminal prosecution.

Only the CDPP and AFP have the legal authority to initiate criminal proceedings against employers.

Employers convicted of intentionally underpaying employees could face:

• Fines of up to three times the amount of the underpayment and $7.825 million.
• Criminal charges, which may result in prison time for individuals involved.
• Court-ordered repayment of outstanding wages and entitlements.

These criminal provisions do not apply to certain payment categories, including:

• Superannuation contributions.
• Long service leave payments.
• Leave entitlements related to being a victim of a crime
• Jury duty leave or emergency services leave.

More details about criminal prosecution, penalties, and exceptions can be found on the Fair Work Ombudsman website.

Employers who voluntarily report potential wage underpayments that may be considered a criminal offence can apply for a cooperation agreement with the Fair Work Ombudsman.

If an agreement is granted, the Fair Work Ombudsman will not refer the conduct for criminal prosecution. However, other enforcement actions, such as civil penalties or litigation, may still apply.

More details on cooperation agreements can be found on the Fair Work Ombudsman website.

A Voluntary Small Business Wage Compliance Code has been introduced to assist small businesses in rectifying wage underpayments.

Under this Code:

• If a small business employer underpays an employee, they cannot be referred for criminal prosecution if they comply with the Code.
• Compliance with the Code allows small businesses to correct mistakes and avoid criminal charges, provided they act in good faith.

The Code is available for download through the Fair Work Ombudsman website.

These new wage theft laws are part of Australia’s broader workplace reforms to ensure stronger employee protections and fair pay for all workers. Employers are encouraged to review payroll systems, audit payments, and ensure full compliance with the Fair Work Act before the changes take effect.