Wage Theft Is Now A Crime: Essential Steps Employers Must Take

Paying people correctly has always been the right thing to do. Now, across Australia, it’s also increasingly a criminal issue. With new federal wage theft offences and existing state laws, underpaying employees can expose businesses and decision‑makers to serious penalties, including prosecution.

If you employ staff, this is the moment to get your house in order. The good news? With clear processes, accurate contracts and the right records, it’s absolutely manageable - and it will build trust with your team.

Below, we break down what “wage theft is now a crime” actually means, who’s at risk, and the practical steps you can take right now to prevent underpayments and stay compliant.

What Does “Wage Theft Is Now A Crime” Mean In Australia?

“Wage theft” generally refers to underpaying employees what they’re legally entitled to - for example, base rates, overtime, penalty rates, allowances, superannuation or leave entitlements. It also covers unlawful deductions and falsifying records.

Criminalisation means some forms of deliberate or reckless underpayment can be prosecuted as criminal offences. While the detail differs between jurisdictions, the direction is clear: regulators are focusing on underpayments, and serious cases won’t just be a civil compliance issue anymore.

At the federal level, wage theft offences sit alongside significant powers for the Fair Work Ombudsman (FWO) and stronger penalties. Several states have also introduced or foreshadowed their own criminal offences. Even where conduct doesn’t reach the criminal threshold, civil penalties, backpay, interest, and reputational damage can be substantial.

For employers, the practical takeaway is simple: treat payroll compliance as a priority governance issue, not just an administrative task.

Who Is At Risk And What Conduct Could Be Criminal?

Any business that employs staff can be affected - from cafés and retailers to tech startups and professional services. Common risk areas include:

• Misclassifying employees (e.g. wrong award or level, or treating someone as a contractor when they’re actually an employee).
• Incorrect application of penalty rates, overtime, allowances or loadings.
• Unlawful deductions (e.g. for till shortages or uniforms without valid authority).
• Roster practices that don’t account for breaks, minimum engagement periods or maximum hours.
• Inadequate or inaccurate time and wages records.
• Failure to pay superannuation correctly and on time.

Conduct that is intentional (or shows reckless disregard) is most exposed to criminal risk. But even genuine mistakes can be costly if they’re systemic or allowed to continue. That’s why prevention, quick detection and prompt rectification are essential.

Step-By-Step: How To Prevent Wage Theft In Your Business

Think of payroll compliance as a continuous cycle: classify, calculate, record, check and correct. Here’s a practical framework you can put in place.

1) Confirm Coverage And Classifications

Start by confirming whether each worker is an employee or contractor and, for employees, which modern award or enterprise agreement applies. Then verify their level/classification against the correct duties and seniority.

A structured review (and periodic spot checks) will reduce errors. Where awards apply, consider a formal Award Compliance review so rules for penalty rates, loadings, overtime and allowances are correctly mapped to your roles.

2) Map Entitlements To Your Rosters And Pay Cycles

Once you know coverage and classifications, translate those rules into your rostering and payroll settings. Build in minimum engagement periods, meal/rest breaks, span of hours, penalty periods and overtime triggers.

If you use workforce management software, cross‑check that your award interpreter is configured correctly. If you roster manually, ensure supervisors understand the rules and lock in approval workflows.

It’s also a good idea to review the legal requirements for employee rostering so your scheduling practices match your obligations.

3) Update Employment Contracts And Policies

Clear, accurate documentation reduces disputes and makes compliance easier. Review your employment agreements to make sure they align with relevant awards and any annualised salary arrangements you use.

Where you pay above award or use an offset clause to cover penalties and overtime, ensure the clause is carefully drafted, the salary genuinely compensates for those entitlements, and you run regular reconciliation checks. Well‑drafted Employment Contracts and a tailored Workplace Policy suite set expectations around rostering, breaks, overtime approval, timesheets, and deductions.

4) Strengthen Timekeeping And Record‑Keeping

Accurate time and wages records are both a legal requirement and your first line of defence. Use reliable time capture (digital where possible), audit access rights, and enforce manager approvals. Lock in retention periods and keep records in one secure system.

Train supervisors on what must be recorded (start/finish times, breaks, overtime approvals, allowances) and ensure employees can view payslips and records easily.

5) Build Payroll Controls And Run Regular Audits

Set up maker-checker controls for payroll processing and a monthly exception report (e.g., hours outside ordinary span, repeated overtime, allowance spikes). Review a sample of payslips each cycle.

Schedule quarterly or biannual payroll audits, especially if you have complex rosters or multiple awards. Consider a focused external review after major changes (e.g., new rostering system, expansion to new locations, or award changes).

6) Pay Super Correctly And On Time

Superannuation is a key part of minimum entitlements. Confirm what counts as ordinary time earnings - start with this overview of Ordinary Time Earnings - and bake super rules into your payroll configuration.

If you pay bonuses or incentives, check whether super applies in your circumstances and document your approach so it’s applied consistently.

7) Create A Clear Fix‑Fast Protocol

Even with strong systems, mistakes can happen. Have a written protocol to encourage staff to raise pay concerns early, triage issues quickly, and backpay promptly with interest where required.

Escalate systemic issues to management, analyse root causes, and update contracts, policies, rosters or payroll settings to prevent repeat errors. Document everything.

Do You Need To Change Your Employment Contracts And Policies?

In many businesses, yes. Old templates often don’t reflect current awards, flexible work practices or modern payroll systems. Consider updating:

• Position descriptions to match award classifications and pay levels.
• Annualised salary clauses (including reconciliation processes and record‑keeping obligations).
• Overtime approval rules, time‑in‑lieu arrangements, and break entitlements.
• Lawful deductions and consent processes (e.g., uniforms or equipment only where permitted).
• Dispute resolution and a confidential channel for pay concerns.

Accurate documents won’t replace compliance, but they will make it easier to run a fair, consistent system and reduce the chance of disputes. If your operations or rosters are complex, invest in tailored Employment Contracts and a contemporary Workplace Policy set that reflects how you actually work.

Common Pay Traps To Watch Out For

Some underpayments come from simple, repeat errors. Keep an eye on these hot spots.

• Penalty Rates And Overtime: Weekends, late nights, public holidays and overtime thresholds can change by classification and industry. The Fair Work pay calculator is a useful cross‑check, but don’t rely on it in isolation - configure your payroll rules correctly and verify with your award mapping.
• Annual Leave Loading: If an award provides it, ensure it’s paid, and confirm whether it applies on termination. Here’s a quick refresher on Annual Leave Loading.
• Minimum Engagements And Breaks: Many awards include minimum shift lengths and paid/unpaid break rules. Align rosters and manager approvals with those requirements.
• Allowances: Travel, tool, meal or uniform allowances can be overlooked or misapplied. Map when they apply and automate where possible.
• Deductions: Only make deductions that are lawful and properly authorised. Avoid clawing back till shortages or breakage unless your award and the Fair Work laws allow it.
• Salaries That “Cover Everything”: If you use annualised salaries or above‑award pay, you still need to check that the salary actually covers the entitlements the employee would have received under the award. Regular reconciliations are critical if you rely on offsets.
• Superannuation Scope: Confirm what forms part of OTE and apply rules consistently. Start with the overview of Ordinary Time Earnings when configuring your payroll.

What Happens If You Discover An Underpayment?

The faster you act, the better your compliance position (and the stronger your trust with staff). A practical remediation process looks like this:

1. Freeze The Risk: Stop the practice causing the issue (e.g., update the roster rule or payroll setting).
2. Scope The Period And People: Identify all affected employees and the timeframe. Pull time/attendance, payroll and roster data.
3. Calculate Backpay: Recalculate entitlements and compare to amounts paid. Where you’ve used above‑award salaries or offsets, run a reconciliation across the period.
4. Pay Promptly: Backpay wages and super, include interest where appropriate, and issue corrected payslips/records.
5. Communicate Transparently: Let affected staff know the error, what you’ve done to fix it, and what you’ve changed to prevent a repeat.
6. Document And Improve: Record your analysis and remediation steps, update contracts/policies, retrain managers, and schedule follow‑up audits.

If the issue is complex or potentially significant, consider an internal legal review or an external payroll audit. Where awards apply widely across your workforce, a formal Award Compliance check can save time and reduce risk in the long run.

Training, Culture And Governance: Your Long-Term Safeguards

Compliance isn’t only about rules and systems - it’s also about people. Build a culture that values paying correctly by:

• Training managers on awards, rostering and approval workflows (especially for penalty periods and overtime).
• Giving payroll and HR the authority to push back on non‑compliant practices.
• Providing a safe channel for employees to raise pay concerns early.
• Setting up a recurring compliance calendar (award updates, audit dates, manager refreshers, system checks).
• Using tailored documentation - from Employment Contracts to Workplace Policies - that match how your business actually operates.

Key Takeaways

• Wage theft laws raise the stakes: deliberate or reckless underpayment can attract criminal liability, on top of civil penalties and backpay.
• Prevention starts with the basics: correct award coverage, accurate classifications and rosters that reflect penalty periods, minimum engagements and breaks.
• Strong foundations matter: use tailored Employment Contracts, a practical Workplace Policy set, and robust timekeeping and payroll approval controls.
• Watch the common traps: penalty rates, overtime, allowances, Annual Leave Loading, and super on ordinary time earnings.
• Audit regularly and fix fast: schedule payroll audits, investigate concerns promptly, and backpay with a clear remediation protocol.
• When in doubt, get help: a focused Award Compliance review can streamline setup and reduce risk across your workforce.

If you’d like a consultation on preventing wage theft and setting up robust payroll compliance in your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.