What Is Wage Theft? (2025 Updated)

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You’ve probably heard the term ‘wage theft’ coupled with talk of tougher sanctions and criminalisation for employers who underpay their employees.

Put simply, wage theft is the underpayment of employees. This often occurs when employers fail to pay their staff the correct wages, do not adhere to the relevant Modern Award, or neglect to provide proper entitlements such as superannuation. It’s crucial to understand your obligations, as detailed in our Modern Awards resources.

In Australia in 2025, the legal landscape around wage payments remains complex. High compliance and labour costs mean that even with the best intentions, mistakes can happen – especially if you haven’t kept up-to-date with the latest changes in workplace law.

Wage theft disproportionately affects society’s most vulnerable. Casual workers and foreign workers—often with limited support networks and little knowledge of their rights—are extremely susceptible to these practices.

Wage theft is alarmingly widespread. Recent estimates now suggest that around 15% of Australian workers are underpaid, resulting in over $1.8 billion in wages being effectively stolen each year. For more insights into preventing underpayment and ensuring fair treatment, our industry regulations guide is a valuable resource.

Where Does Wage Theft Occur?

Australia has a long history with wage theft. For instance, a notable class action in Queensland resulted in the recovery of stolen wages for Aboriginal workers. Moreover, an inquiry into the ‘Wages and Conditions of People Working under the 417 Working Holiday Visa Program’ revealed that nearly one‐third of foreign workers were not receiving full payment for the work they performed. For further understanding of your workplace rights, you might find our Employment Law section useful.

In 2025, the issue remains in the headlines, with multiple cases exposing how millions of dollars in wages continue to be withheld from workers in major franchises and well-known establishments across Australia.

Let’s look at some examples of how wage theft can occur through the underpayment of entitlements.

One of the most notable examples is the University of Melbourne. In this case, allegations of wage theft—spanning over a decade and affecting more than 1500 staff—surfaced when the university applied incorrect piece rates to its employees and mislabelled tutorial sessions as ‘practice classes’ to avoid paying full wages. For guidance on drafting compliant employment contracts, see our Employment Contract service.

Have you noticed that even high-profile names can’t escape scrutiny? One of the most infamous cases involved George Calombaris of MasterChef. His enterprise was found to have underpaid staff by misapplying annualised salary arrangements and the Modern Award, which resulted in many workers not receiving overtime or penalty rates. The damage to the brand’s reputation was substantial – a stark reminder of the risks associated with wage theft. For more details on how Modern Awards should be correctly applied, refer to our Modern Awards resource.

What Are the Consequences Of Wage Theft?

The impact on individuals is severe. The process of seeking redress through adversarial legal proceedings can be costly, stressful, and time-consuming, which discourages many employees from pursuing their rightful wages.

For a business, the financial penalties can be heavy. Beyond the immediate costs, wage theft can inflict irreparable damage to your reputation and brand, highlighting the importance of strict compliance and regular payroll reviews.

I’m a Small Business Owner: What If I Accidentally Underpay My Staff?

While large corporations are not immune, small businesses without dedicated payroll officers are at particular risk of inadvertently underpaying workers. If you operate as a sole trader, for example, it’s essential to familiarise yourself with your obligations – our Sole Trader vs Company comparison can help you choose the best structure to minimise compliance risks.

Understanding Modern Awards is complex, with different payment structures available to employers. You must stay informed about any updates to Modern Awards and adjust your payroll systems accordingly. If this feels overwhelming, you can seek professional help to ensure you’re establishing the correct payment framework, possibly through services like our Employment Contract drafting and review.

It’s imperative to get this right so don’t hesitate to obtain legal advice. A thorough contract review – such as our Contract Review and Redraft service – can help safeguard your business from unintentional breaches.

What Happens If I Have Mistakenly Underpaid My Employees?

If you discover that you have underpaid your employees, it is essential to rectify the situation as soon as possible. Begin by calculating exactly how much your staff are owed and for what period the underpayment has occurred.

You should back pay your staff without delay and notify them of the error. The Fair Work Ombudsman provides a step-by-step guide to help you address and correct underpayments.

What Are The New Laws To Fight Wage Theft?

Victoria continues to lead in the fight against wage theft. As of 2025, it remains a criminal offence to deliberately underpay employees, carrying penalties of up to 10 years imprisonment and fines of up to $1 million. Other states are increasingly adopting similar measures to protect workers’ rights.

At the federal level, the Fair Work Ombudsman plays a critical role in not only assisting employees in reclaiming their lost wages but also in levying fines against non-compliant businesses.

What Next?

Here at Sprintlaw, our employment lawyers are experienced in helping business owners set up robust employment contracts and navigate the intricacies of Modern Awards. Whether you’re starting out or already have contracts in place, we offer tailored consultations to address your specific concerns. For more detailed assistance, consider our services for Employment Contracts and Modern Award Analysis.

Feel free to contact us at team@sprintlaw.com.au or on 1800 730 617 for a free consultation.

As part of ongoing compliance, it is advisable to regularly audit your payroll processes and review your employment agreements to ensure they meet current legal standards. Staying proactive by scheduling periodic reviews can help you avoid future underpayments and safeguard your business reputation. For further assistance on maintaining compliance, our Business Set-Up team is here to help you every step of the way.

Justine Wu

Justine is a legal consultant at Sprintlaw. She has experience in civil law and human rights law with a double degree in law and media production. Justine has an interest in intellectual property and employment law.

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