Criminalising the Deliberate Underpayment of Wages, Effective from 1 January 2025

Intentional underpayment of wages and other entitlements is now a criminal offence, marking a critical time for businesses to address compliance.

Criminalising intentional wage theft

Starting January 1, 2025, intentional underpayments of wages, or ‘wage theft’, can be a criminal liability offence. This is a shift from the previous civil liability offence. The new wage laws were introduced by the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 (Cth) (‘the Act’).

This legislation imposes strict penalties on businesses and employers who intentionally commit wage theft.

When is ‘underpayment’ deemed a criminal offence?

Under the new regulation, intentional underpayment of wages can be classified when an employer: fails to pay required amounts to employees, which can include wages or contributions for benefits such as superannuation, as mandated by the Fair Work Act 2009 (Cth) or an industrial instrument; and deliberately engages in actions that fail to pay these amounts to the employee by the due date, which is considered a violation.

The law does not apply to accidental, inadvertent or genuine mistakes, as stated on the Fair Work Ombudsman website.

What are the penalties?

The penalties for businesses and individuals engaging in underpayments towards employees vary.

For businesses:

• If the court can determine the amount of the underpayment, the penalty will be the greater of three times the underpayment amount or $7.825 million.
• If the court cannot determine the amount of the underpayment, the penalty will be $7.825 million.

For individuals:

• imprisonment of up to 10 years
• if the court determines the underpayment amount, the penalty will be the greater of three times the underpayment amount and $1.565 million; or
• if the court can’t determine, a fine of $1.565 million applies.

Where to next?

Employers found guilty of deliberate underpayments face severe penalties, including imprisonments and fines, which therefore requires businesses to be on top of organising necessary audits. Get in touch with our highly experienced compliance experts to conduct compliance checks, and build a highly functional payroll system and supportive reporting mechanism.