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

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Wage theft was never legal to begin with — but now, you could go to jail for it.

The criminalisation of wage theft in Australia marks a significant shift, with employment laws stricter than ever. Authorities are cracking down on employers who mistreat their workers, reinforcing the importance of compliance.

Read on to learn everything you need to know.

What Does The Criminalisation Of Wage Theft Mean?

The criminalisation of wage theft means it is now a criminal offence to deliberately underpay employees. This means that an employer who intentionally pays their employees below the minimum wage or engages in dishonest conduct related to employee wages may face imprisonment.

Previously, underpayment was treated as a civil offence under workplace laws. Employers could still face financial penalties, such as fines or orders to repay outstanding wages, but jail time was not a consequence.

Now, with the introduction of criminal penalties, employers found guilty of wage theft can face fines, imprisonment, or both, depending on the severity of the offence. This significant change reflects a stricter stance on ensuring employees are paid their lawful entitlements.

Understanding the Criminalisation Of Wage Theft Under The Fair Work Act

So, what do the new laws say?

In 2024, the Fair Work Act was updated through the Closing Loopholes Amendments. One of the most significant changes was the criminalisation of wage theft, which refers to intentionally underpaying employees.

Multiple sections of the Fair Work Act address areas where underpayment can occur, such as failing to meet obligations under modern awards. Key sections include:

Section 44: Prohibits contraventions of the National Employment Standards (NES).
Section 45: Prohibits contraventions of modern awards.
Section 50: Prohibits contraventions of enterprise agreements.
Section 323: Mandates that employers pay employees in full for work performed, at least monthly.
Section 535: Requires employers to make and keep employee records.
Section 536: Obliges employers to provide pay slips to employees.

While these provisions have long been part of the Fair Work Act, the Closing Loopholes law introduced a specific provision (section 327A of the Fair Work Act). This provision introduces a criminalisation of deliberate breaches.

This provision is distinct from the earlier sections (Sections 44, 45, 50, 323, 535, and 536), which were subject only to civil penalties. Now, intentional wage theft is considered a criminal matter, punishable by jail time, fines, or both.

Civil vs Criminal Penalties

It’s important to note that civil penalties for wage theft still apply. Wage theft is now both a civil and criminal offence. Criminal penalties are reserved for cases where employers have deliberately engaged in wage theft, such as:

Failing to pay employees their full wages.
Paying employees below the national minimum wage.
Consistently delaying payments.

Under the new law, individuals found guilty of deliberate wage theft may face up to 10 years in prison and fines of up to $1.65 million (or three times the underpayment amount, whichever is greater). Companies may be fined up to $7.825 million (or three times the underpayment amount, whichever is greater).

Prosecutions under the new wage theft offence will be initiated by the Director of Public Prosecutions or the Australian Federal Police following thorough investigations by the Fair Work Ombudsman. This ensures that only cases with clear evidence of intentional wrongdoing will be pursued criminally.

If an employer has made an honest mistake about employee entitlements, they are unlikely to face criminal penalties. However, they must demonstrate that the underpayment was unintentional. Employers cannot simply claim ignorance — they must show they took reasonable steps to ensure compliance. Even in cases of honest mistakes, civil penalties may still apply.

Your Guide To The Voluntary Code: A Key To Compliance For Small Businesses

As a small business employer, it’s important to ensure your practices and procedures comply with legal requirements. Following the Voluntary Small Business Compliance Code is a great way to protect your business, even if something goes wrong.

The Voluntary Small Business Compliance Code (the Code) provides a set of guidelines for small business employers. If a small business employer does not intend to underpay their employees and follows the guidelines outlined in the Code (many of which you may already be following), they can benefit from its protections. This mechanism is designed to ensure that inadvertent errors are not penalised while encouraging proactive compliance with wage payment obligations.

To qualify for these protections, employers don’t need to meet every requirement. Instead, the Fair Work Ombudsman (FWO) evaluates the overall circumstances and the efforts made by the business to ensure compliance.

Let’s take a closer look at the exact steps you should take to stay legally compliant under the Code.

Steps Employers Must Take To Stay Compliant

1. Check Correct Pay Rates And Entitlements

Identify the correct award or enterprise agreement for employees, including the applicable version.
Confirm the classification of employees and update information affecting pay (e.g., age, location, hours).
Pay all required entitlements, such as minimum rates, allowances, penalties, and overtime.
Use tools like the Fair Work Pay Calculator and guides to ensure accurate calculations.
Stay updated with annual changes to minimum pay rates, effective from 1 July each year.

2. Meet Pay Slip And Record-Keeping Obligations

Provide pay slips within one working day of pay day, ensuring they include all required information.
Maintain accessible, accurate, and legible employee records, such as time worked, classifications, and leave requests.
Use templates and resources available on the Fair Work website to stay compliant.

3. Stay Updated On Workplace Laws

Monitor changes to laws, pay rates, and awards through:
- Fair Work email updates and social media channels.
- Employer associations or professional advisors.
- Annual pay reviews and updates.
Track employee-specific changes that affect pay (e.g., role adjustments, qualifications, roster changes).

4. Seek Help When Needed

Consult reliable resources, such as the Fair Work Ombudsman and Fair Work Commission.
Seek expert advice from employer associations, legal experts, or payroll professionals.
Ensure the advice is accurate and tailored to your business and employee circumstances.

5. Address Issues Promptly

Rectify underpayments by repaying employees as soon as possible.
Identify the cause of errors and implement measures to prevent recurrence.
Communicate clearly with employees about the issue, the resolution process, and steps being taken to prevent future mistakes.

By following these steps, businesses can maintain compliance with legal obligations and handle pay-related matters effectively.

What Are The Key Compliance Challenges And How Can They Be Overcome?

Legal compliance comes with its fair share of challenges. From staying updated on changing workplace laws to ensuring accurate employee pay and entitlements, navigating these complexities can be overwhelming. Many employers face difficulties keeping up with updates to pay rates, awards, and regulations, which can lead to unintentional errors.

However, implementing the right legal measures can help mitigate these risks. It’s essential to ensure that your workplace legal documents — such as Employment Contracts, Workplace Policies, and Staff Handbooks — are accurate, regularly updated, and reflect your specific workplace practices. These documents are key to maintaining legal compliance and clearly communicating expectations to your team.

Staying informed about workplace law changes is equally important. Legal compliance isn’t just about having the right documents — it’s about your actions too. A legal expert can help guide you through best practices, ensure your documents are tailored and up-to-date, and keep you informed about relevant changes in workplace laws, so you’re always one step ahead.

As An Employer, Where Can I Access Support And Resources?

Navigating the complexities of employment laws and ensuring compliance can be challenging for employers. Fortunately, several resources are available to assist:

Fair Work Ombudsman (FWO): The FWO provides comprehensive information on workplace rights and obligations, including pay rates, leave entitlements, and dispute resolution. Their website offers tools and resources to help employers understand and comply with Australian workplace laws.
Department of Employment and Workplace Relations (DEWR): DEWR offers support for employers, including guidance on workplace relations and assistance with understanding legislative changes.

Voluntary Small Business Wage Compliance Code: This code offers guidelines for small businesses to ensure compliance with wage laws. Adhering to the code can protect employers from criminal prosecution related to wage underpayments.
Expert Legal Help: There are times when tailored advice is essential for your business, as general guidance may not address your specific circumstances. This is where legal experts play a crucial role. They can provide customised advice to ensure your small business remains legally compliant, helping you navigate complex laws and regulations with confidence.

When Do The New Wage Theft Laws Come Into Effect?

The criminal sanctions for intentional wage theft apply only to conduct occurring on or after 1 January 2025, or from the date following the registration of the Voluntary Small Business Wage Compliance Code (whichever is later). The law is not retroactive in nature.

Key Takeaways

Wage theft laws are already in effect, making it crucial for your business to stay updated with evolving compliance measures. Here’s a quick summary of what we’ve covered:

Wage theft is now a criminal offence in Australia, with penalties including fines and imprisonment for intentional underpayment of employees.
The Fair Work Act’s updated provisions include strict requirements for pay rates, entitlements, and record-keeping, emphasising compliance.
Employers must ensure accurate employee classifications, adhere to pay obligations, and provide timely pay slips to avoid legal consequences.
Honest mistakes in pay calculations may result in civil penalties, but deliberate breaches can lead to criminal prosecution.
The Voluntary Small Business Compliance Code offers guidance to help small businesses stay compliant and mitigate risks.
Staying informed about changes to workplace laws and seeking expert legal advice are critical for maintaining compliance and avoiding costly errors.
Resources like the Fair Work Ombudsman and legal professionals provide essential support for navigating wage theft laws and compliance challenges.

If you would like a consultation on your options going forward, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.

Sapna Goundan

Sapna has completed a Bachelor of Arts/Laws. Since graduating, she's worked primarily in the field of legal research and writing, and she now writes for Sprintlaw.

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