New criminal underpayment laws

New criminal underpayment laws kick in from 1 January 2025. Are you confident you’re compliant? 

Following a raft of underpayment scandals in Australia, the Fair Work Ombudsman has announced that from 1 January 2025, intentional underpayment of wages or entitlements can be a criminal offence.

The legislation follows a number of years of underpayment scandals involving major corporations including Woolworths, Commonwealth Bank, Qantas, Super Retail Group, NAB, BHP, 7-Eleven and the Australian Broadcasting Corporation (ABC).

From January 1, Australian employers found to have deliberately underpaid workers could face up to 10 years in prison and fines of A$1.65 million, under new federal laws criminalising wage theft.

Companies found guilty could be penalised up to A$8.25 million.

When might a wages non-compliance matter be considered criminal?

An employer may commit a criminal offence where they:

• were required to pay an amount: 

         – to an employee such as wages or paid leave entitlements

         – on behalf of the employee, or for their benefit, such as superannuation or a salary sacrifice arrangement

• have intentionally done something that intentionally results in those amounts not being paid on or before the day they were due.

The role of the Fair Work Ombudsman in investigations into wages or entitlements obligations

The Fair Work Ombudsman (FWO) can investigate suspected criminal underpayment offences and refer suitable matters for criminal prosecution. If a person is convicted of a criminal offence, a court can impose fines, prison time, or both.

The Fair Work Ombudsman’s (FWO’s) decision to refer matters for possible criminal prosecution will depend on whether they hold enough evidence and whether it’s in the public interest. The FWO’s Compliance and Enforcement Policy outlines the factors the Ombudsman will consider in more detail.

The Commonwealth Director of Public Prosecutions and the Australian Federal Police are the only bodies that can initiate legal proceedings for a criminal offence.

Fines and prison time

For a company, if the court can determine the amount of the employer’s underpayment, the maximum fine will be the higher of:

• 3 times the amount of the underpayment
• $8.25 million.

If the court can’t determine the amount of the underpayment, the maximum fine is $8.25 million.

For an individual, the court can impose a maximum of 10 years in prison or a fine, or both. If the court can determine the amount of the employer’s underpayment, the maximum fine will be the higher of:

• 3 times the amount of the underpayment
• $1.65 million.

If the court can’t determine the underpayment, the maximum fine is $1.65 million.

How employers can get on the front foot

• Ensure appropriate interpretation of the industrial instrument/s that apply to your business and employees.
• Confirm Award-covered employees are classified and remunerated correctly for the role they’re performing now.
• Ensure annualised wage arrangements are in compliance with the applicable Award and are sufficient to cover the minimum wage, overtime, penalty rates and allowances to which each employee is entitled under the relevant instrument.
• Conduct regular payroll audits to identify and resolve wages issues early. 

Bare Bones Consulting is all about getting things right first time for our clients. Our approach is grounded in genuine HR management-level experience across both white- and blue-collar environments and the expertise to tailor HR services to your business…at a value for money price. We’ll help ensure you classify your employees correctly under the right Award and provide advice on the right rates of pay and entitlements so you can rest easy and focus on growing your business. Sound good? With Bare Bones Consulting, your own HR expertise resource is only one call away.