New Criminal Penalty for Wage Theft: What Employers Need to Know

As of 1 January 2025, intentional wage theft—intentionally failing to pay employees their full wages or entitlements—is a criminal offence under the Fair Work Act 2009 (Cth). This means employers could face criminal liability for underpaying employees if the underpayment is found to be intentional.

What is Wage Theft? Under the new Section 327A, an employer commits wage theft if they engage in intentional conduct that results in them failing to pay a ‘required amount’ to an employee in full, on or before the date it is due to be paid. To determine whether an employer’s actions are intentional, a number of relevant factors will be considered as to whether the employer took reasonable steps to prevent underpayments. These steps may include:

• regularly checking that employees are paid correctly according to the relevant industrial awards or agreements, including staying updated on minimum wage increases and any legislative changes;
• taking immediate action upon discovering an underpayment, such as seeking legal or financial advice and making prompt repayments to rectify the issue; and
• implementing measures to prevent similar underpayments from occurring in the future.

Civil Penalties may still apply

It’s important to note that even if the underpayment is not intentional, employers may still face liability under the existing civil penalty regime of the Fair Work Act.

Voluntary Small Business Wage Compliance Code (The Code)

To help small businesses avoid criminal prosecution, the Fair Work Ombudsman (FWO) has introduced the

Voluntary Small Business Wage Compliance Code.

The Code helps small business employers (i.e. those with fewer than 15 employees) avoid criminal prosecution where they have not intentionally underpaid their workers.

The Code can be accessed on the FWO’s website here.

If a small business employer can satisfactorily demonstrate to the FWO that they have complied with the Code, then the FWO cannot refer that employer for criminal prosecution under the new criminal offence provision.

This Code is not a checklist; meaning a small business employer need not show that they meet all the factors. Instead, the FWO will look at the overall picture and the business’ particular circumstances to determine whether the Code has been satisfied.

A guide to paying employees correctly (The Guide)

Separately, the FWO has also issued ‘A guide to paying employees correctly and the Voluntary Small Business Wage Compliance Code’ in which all businesses, large or small, can follow to ensure they are taking the right steps to avoid underpayments to their employees.

The Guide explains in detail the operation of the criminal offence provision (including exceptions that apply), provides guidance on how to use the Code, and includes a checklist of steps that employers should take to ensure they are paying their employees correctly.

A copy of the Guide can be accessed using the same link provided above.

In summary

In short, we encourage all employers to stay vigilant and diligent in ensuring that all of their employees are being paid correctly, including by making use of the FWO’s resources above and keeping in line with any updates to relevant modern awards and legislation.

If you require assistance in determining whether your employees are being paid correctly or if you would like advice on what to do if you think an underpayment has occurred, please do not hesitate to reach out to one of the lawyers in our workplace team.

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For further information contact Danny Clifford.

The assistance of, Monique Chow, Lawyer, in researching and developing this article is gratefully acknowledged.