Underpayment to be treated as criminal offence under new laws

Intentional underpayment of wages or entitlements can now be prosecuted as a criminal offence according to new laws implemented on 1 January 2025.

The Fair Work Ombudsman will investigate suspected underpayment offences and refer suitable matters for criminal prosecution. Individuals who are found guilty could face a maximum of 10 years in prison. The court may impose fines, prison time, or both on convicted parties.

Maximum penalties for the criminal underpayment offence are the greater of three times the amount of the underpayment (if the court can determine the underpayment) and $8.25 million, or, if the court can’t determine the underpayment, up to $8.25 million.

Fair Work Ombudsman Anna Booth says the laws do not include genuine mistakes.

“We understand that small business employers who work diligently to do the right thing by their employees may be concerned about being impacted by the criminalisation of intentional underpayments,” says Booth.

“They should rest assured – the offence applies only to intentional underpayments, and compliance with the voluntary code means we can’t refer a small business for possible prosecution.”

Protections for businesses to avoid criminal prosecution include the voluntary small business wage compliance code and cooperation agreements.

The code applies to small businesses that employ fewer than 15 people. It provides a non-exhaustive list of actions that businesses can take to demonstrate an underpayment was unintentional.

“Intentional underpayments are unacceptable, and the Fair Work Ombudsman will investigate and refer for possible prosecution conduct caught by the new criminal underpayment offence. But there is no reason employers can’t take reasonable steps to get their compliance right,” says Booth.

“Employers are encouraged to read the Fair Work Ombudsman’s guide, which outlines steps businesses can take to ensure they’re paying employees correctly, including practical tools, a handy checklist, examples and best practice tips, and which explains how the code will apply,” says Booth.

Both the guide to paying employees correctly and the voluntary small business wage compliance code are available on the FWO’s website.