Wage underpayment is now a crime: What small businesses need to know in 2025

Starting January 1, 2025, intentional wage underpayments could land you in the big leagues of criminal offences. And we're not talking about a slap on the wrist—this could mean hefty fines, a possible prison sentence, or both.

Yep, you read that right. So if you’ve been taking the "oops, I forgot" approach to paying employees correctly, it’s time to rethink your strategy. Let’s break down what this means for employers.

What’s the deal with this "intentional underpayment" thing?

Let’s start with the basics: Wage theft used to be “just a mistake” … but now, starting January 1 2025, it’s a criminal offence. We know, it sounds dramatic. But it’s a big deal, and here’s why:

If you knowingly (and let’s face it, intentionally) short-change an employee on their wages, leave entitlements, superannuation, or other benefits, it could cost you much more than just bad PR. It could mean criminal charges, including fines, or potentially jail time. Honest mistakes are still… well, mistakes. But if you’re playing fast and loose with employees’ pay, you could be playing with fire.

Make sure you’re on top of your ER obligations. With our 24/7 employment relations advice line—get expert advice round the clock to ensure you're compliant and avoid costly legal mistakes.

Who’s in trouble?

It’s simple: If you’re an employer (whether an individual or a company) and you intentionally underpay your team, the law will be coming for you. No more hiding behind the excuse of “I didn’t know” or “It was just one slip-up.”

The Australian Fair Work Ombudsman (FWO) will be on the lookout, investigating and possibly referring cases to the Commonwealth Director of Public Prosecutions or the Australian Federal Police. Yikes, right?

Don’t leave your company exposed! With our HR document library, you’ll have access to ready-made policy templates for wage compliance and more. Stay on the safe side with up-to-date documentation.

So, what’s at stake?

Here’s where it gets serious: intentional underpayment could mean criminal charges. And criminal charges aren’t just “oopsies,” they come with real consequences. Think fines that could bankrupt you, and in the worst-case scenario, prison time. Definitely not a fun time for your business.

But let’s be real, you’re not a villain in a movie. So how do you avoid this? Let’s break it down:

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How can you avoid the criminal underpayment trap?

Pay attention to the details:

Calculate wages and entitlements properly—it’s not rocket science (unless your employees are astronauts, then you might want to check your math). Ensure you’re paying on time, every time. Your payroll system should be smoother than your morning coffee.

Train your team:

Make sure everyone in your HR and payroll departments knows the new rules. No more “oops” moments. If someone is intentionally skimping on pay, it’s time for a serious chat.

The big exceptions: What’s not included in the new rules?

While it’s important to be vigilant, the new rules don’t cover everything. So take a deep breath—things like superannuation contributions, long service leave, and jury duty leave are not included in this new criminal underpayment framework.

These are still regulated by different laws. So go ahead, keep your cool when it comes to these, but make sure you stay on top of everything else.

What happens if you fess up?

Here’s a twist: If you realise you’ve made an error and you voluntarily report it, you might not be looking at criminal charges. Instead, you could enter a cooperation agreement with the Fair Work Ombudsman.

This means, if you’re upfront and honest about your mistake, they might not refer you for prosecution. It’s like getting a second chance, but you still have to pay your dues—literally.

Need to navigate the cooperation agreement process? Our employement relations advice line can help guide you through these tricky waters with expert, 24/7 advice.

Small businesses, don’t panic!

If you’re running a small business, there’s a bit of a lifeline. As long as you comply with the Voluntary Small Business Wage Compliance Code, you won’t be referred for criminal prosecution if you underpay an employee.

But don’t take this as a green light to slack off—still make sure you’re following best practices and paying employees correctly!

If you’re a small business owner looking for policies that keep you compliant, we offer downloadable policy templates and guidelines to get you on the right track,in our exclusive HR document library.

Penalties: Not a fun game of monopoly

Under the new laws, there are civil penalties as well, especially for non-small businesses. The stakes are higher now. Civil penalties may be up to three times the value of the underpayment or based on the penalty unit amounts. Either way, it’s going to cost you—so don’t even think about playing the “I didn’t know” card.

But wait… There’s more!

Changes also include increased penalties for serious contraventions. So if you know about the issue, and you still choose to ignore it, you could be facing penalties that are five times worse than before.

Make your life easier and stay compliant with BrightHR—get tools that track employee hours, employee time-tracking, annual leave calculator, and keep your records organised to prevent any future mishaps.

It’s time to get real about wage compliance

Look, running a business is hard enough without worrying about wage theft accusations. But with these changes coming, now is the perfect time to make sure you’re not cutting corners when it comes to paying your team.

With BrightHR, you’ve got an ally in the fight against unintentional mistakes. Our HR software can help you track and calculate everything with ease. No more excuses. No more stress. Just the right HR management, by HR professionals, for all business owners.

So, let’s keep it above board, keep your employees happy, and keep your business out of the courtroom. You’ve got this.