Wage theft — criminal offence
Effective 1 January 2025
Intentional underpayment of wages is a criminal offence under amendments to the Fair Work Act 2009. Individuals face up to ten years imprisonment. Fair Work Ombudsman wage theft guidance .
Wage compliance · Australia-wide
Are You Paying Your Employees Correctly?
Wage compliance has become harder. Award classifications shift, payroll configurations drift, and small errors compound across years. The Wage Compliance Audit confirms classifications, configurations, and entitlements so you can fix any gaps on your terms. Fixed fee, fully scoped before work begins.
View Wage Compliance Audit
No obligation · 30-min scoping call · Direct conversation with Daniel
Or call Daniel directly: 1300 23 44 23
★★★★★ 5.0 · Verified Google reviews
Founder
Daniel Holbrook
MBA · AHRI Member · Cert IV WHS
Credentials & guarantees
MBA
Cert IV Investigations
Cert IV WHS
AHRI Member
Professionally Insured
Fixed-Fee Pricing
No Lock-In Contracts
★★★★★ 5.0 on Google
The new compliance reality
Wage Theft Is Now a Criminal Offence
Since 1 January 2025, intentional underpayment of wages is a criminal offence under Australia's wage theft laws, enacted through amendments to the Fair Work Act 2009. Individuals face up to ten years imprisonment, and fines can reach the greater of three times the amount of the underpayment or $1.65 million per contravention. The offence applies where an employer has engaged in conduct that forms a systematic course of deliberate underpayment. But the financial exposure does not stop at the criminal threshold. Inadvertent shortfalls, the kind that affect many business owners genuinely trying to do the right thing, still carry significant civil consequences and back-payment obligations stretching over six years.
Civil penalties
Up to 3× underpayment per contravention
Inadvertent shortfalls still carry significant civil consequences and back-payment obligations stretching over six years, in addition to per-contravention fines.
Voluntary safe harbour
Small Business Wage Compliance Code
Self-identifying shortfalls and engaging with the Code is the key precondition for the FWO to decline criminal referral to the Commonwealth DPP. Voluntary Small Business Wage Compliance Code .
How underpayment happens
Wage Underpayments: Could Your Small Business Be Underpaying Without Knowing It?
Many employers who underpay their employees do so unintentionally. The shortfall typically stems from incorrect award classification, missed overtime rates, outdated payroll configurations, or a failure to reconcile annualised salaries against the applicable award. The employer believes they are paying correctly because the payroll software produces a payslip every pay period. The numbers look right. But payroll software calculates what it is told to calculate. If the underlying classification is wrong, the output will be incorrect for every pay period until the error is identified.
Intentional Versus Inadvertent Underpayment Under the Wage Theft Laws
The criminal wage theft offence under the Fair Work Act applies where an employer has intentionally engaged in conduct forming a systematic pattern of underpayment. The employer must have engaged in conduct knowing that the conduct would result in underpayment, and that conduct must form a systematic pattern. Inadvertent shortfalls, where the employer genuinely did not know the correct rate or obligation, are not criminal. However, they still carry substantial civil consequences: up to three times the amount underpaid per contravention, plus fines that accumulate rapidly across multiple employees and pay periods.
The Voluntary Small Business Wage Compliance Code provides a safe harbour for small business employers who self-identify shortfalls and take steps to remediate them before the Fair Work Ombudsman commences an investigation. Compliance with the Code demonstrates good faith to the Fair Work Ombudsman and is the key precondition for the FWO to decline to refer a small business employer's conduct to the Commonwealth Director of Public Prosecutions for criminal wage theft charges. The Code is voluntary, but for any small business employer who suspects an issue, it represents the most protective path forward.
Get ahead of the FWO
A Wage Compliance Audit identifies classification errors, missed entitlements, and payroll configuration gaps before the Fair Work Ombudsman does.
- Award Classification AuditConfirm the correct award and classification level for every employee against duties performed.
- Payroll Configuration ReviewTest base rates, penalty rates, overtime, allowances, loadings, and superannuation OTE settings.
- Shortfall Quantification + RemediationCalculate any underpayments across the six-year window and document the FWO-acceptable remediation pathway.
Wage Compliance & Classification Review starts from $2,500 + GST.
Where the gaps surface
Where Employer Wage Compliance Gaps Most Commonly Occur
The highest risk areas for any Australian business are consistent across industries, and Daniel encounters them regularly in reviews conducted through Brookvale HR Solutions.
Incorrect Award Classification
Incorrect award classification is the most frequent source of pay shortfalls. An employee classified under the wrong award, or at the wrong level within the correct award, will have incorrect base rates, applicable rate structures, overtime thresholds, and loadings applied to every pay period. A classification mistake that costs an employee $50 per week becomes a $2,600 liability after one year and a $15,600 liability after six years.
Missed Penalty Rates and Allowances
Missed penalty rates, overtime calculations, and allowances occur when pay systems are not configured correctly for the relevant modern award. Saturday rates, Sunday rates, public holiday rates, overtime thresholds, and shift loadings are all areas where configuration errors result in employees receiving less than their correct wages.
Super, salaries, and EAs
Superannuation, Annualised Salaries, and Enterprise Agreements
Superannuation shortfalls arise from incorrect calculation of ordinary time earnings. The definition of ordinary time earnings differs depending on the employee's award and employment arrangement, and not all payments form part of the base for superannuation contributions. Errors in superannuation contributions compound over time and are frequently identified alongside other compliance issues during a structured review.
Annualised salary errors are particularly common in professional services and salaried roles. Where an employer sets a salary intended to absorb award obligations, the Fair Work Act requires an annual reconciliation to confirm the employee has not been disadvantaged. Many employers either do not perform this reconciliation, do not understand what it must include, or do not realise the obligation exists under their applicable employment contract or enterprise agreement.
Software is not a defence
Why Payroll Software Alone Does Not Ensure Compliance
Payroll software is a calculation engine. It applies the rates and thresholds it has been configured with. The software does not flag errors or compare its output against the relevant award.
Payroll software is a calculation engine. If the classification is wrong, every pay run will be incorrect.
If an allowance has not been configured, it will not appear on the payslip. If overtime thresholds are set incorrectly, they will be applied incorrectly for every employee affected. Treating a payroll system as a substitute for correct classification is a common and costly mistake, and it does not provide a defence against a criminal offence charge where the employer should reasonably have known the correct rate.
Penalty exposure
Penalties for Wage Theft: What Employers Now Face
Penalties for wage theft are severe across the criminal, civil, and operational dimensions. Six categories of consequence apply to non-compliant employers under the amended Fair Work Act framework.
Criminal: imprisonment up to 10 years
Officers convicted of intentional underpayment face up to ten years imprisonment under the Fair Work Act criminal provisions.
Criminal fines for individuals
The greater of three times the underpayment or $1.65 million per contravention applies to individuals convicted of wage theft.
Corporate fines
For corporations, the maximum fine is the greater of three times the shortfall, $8.25 million, or three times the benefit obtained.
Civil penalties
Inadvertent shortfalls can reach up to three times the amount owed plus per-contravention fines under FWO civil action.
Backpay obligations: 6-year window
Statutory limitation under the Fair Work Act extends back-payment obligations across six years from the date of underpayment.
FWO compliance notices
The Fair Work Ombudsman can issue compliance notices requiring underpayments to be calculated and rectified within a specified timeframe.
If the FWO has notified you, the SBWCC voluntary safe harbour window is closing fast. Self-reporting before an investigation commences is the key precondition for the FWO to decline criminal referral. Call Daniel on 1300 23 44 23 .
Tool
Underpayment Risk Indicator
Step 1 of 4
How Daniel helps
How Daniel Helps Employers Achieve Wage Compliance
Daniel conducts a structured review of your award classifications, payroll configurations, and pay calculations. The methodology is systematic.
Daniel provides professional advice on remediation and has conducted these reviews across dozens of industries, including those with complex award structures where classification errors are most common. Daniel's qualifications, methodology, and industry experience are detailed on the About page.
- MBA
- Cert IV Government Investigations
- Cert IV WHS
- AHRI Member
- Former Military Police Officer
- Confirm the correct award or enterprise agreement
Identify the applicable instrument for each employee, including any enterprise agreement coverage that overrides modern award terms.
- Verify classification levels against duties
Test the classification against the duties actually performed, not the job title. Misclassification is the most common root cause of underpayment.
- Check system settings against the award's rate tables
Compare configured base rates, penalty rates, overtime thresholds, allowances, and loadings against the current Fair Work Commission rate tables.
- Verify superannuation against ordinary time earnings
Test contributions against the OTE definition for each award and employment arrangement. OTE varies by instrument and not every payment forms part of the contribution base.
- Calculate identified shortfalls
Quantify any underpayments across base rates, penalty rates, overtime, allowances, and superannuation, and document the methodology so the calculations are defensible.
You work directly with me throughout the engagement. There are no junior consultants reviewing your payroll data, no handoffs to someone unfamiliar with your award structure. Every finding and every remediation strategy comes from the same experienced professional who conducted the review. I quote a fixed fee before work begins, and you are never locked into a retainer.
Client review
What clients say about working with Daniel
★★★★★ 5.0
Verified Google review
“I recently engaged Brookvale HR Solutions, led by Dan and his team, and was thoroughly impressed. Dan combines deep HR expertise with a practical, people-first approach. He provides clear advice and handles complex issues with professionalism and empathy. He's a HR / Safety weapon. 10/10 recommend!”
M
Marnie Euler
Google Review
FAQ
Frequently Asked Questions About Wage Theft and Employer Compliance
Common questions on the new wage theft framework, classification gaps, and engaging Daniel for a structured review.
Still have a question?
Call Daniel on 1300 23 44 23
Related employer obligations
Related Employer Obligations Under Australia's Wage Theft Laws
No HR Policies
If your business has grown without formalised employment contracts and policies, wage compliance gaps are almost always present alongside broader HR compliance gaps.
View No HR PoliciesOngoing HR Support
For businesses that need ongoing compliance monitoring and advisory support beyond a one-off audit.
View Ongoing HR SupportLetting Someone Go
If wage compliance issues have surfaced during a termination process or redundancy.
View Letting Someone GoFor further reading on Award classification and wage compliance under Australia's amended wage theft laws, visit the Brookvale HR Solutions blog or explore the compliance tools available on this site.
Next step
Every Pay Run You're Uncertain About Is Another Pay Run at Risk.
Book a Wage Compliance Audit with Daniel, fixed fee, scoped before work begins, no lock-in contracts. Call 1300 23 44 23 or book a free 30-minute strategy call via Calendly.