Many employers in Australia intentionally underpay workers every week, while others don’t realize they’ve made a mistake because wage theft can sometimes happen subtly, such as paying the wrong hourly rate, missing super contributions, skipping overtime, or expecting staff to work through lunch without pay. However, these experiences can create serious legal risks that many businesses, especially small ones, are unprepared for.
Australia officially declared wage theft a federal crime under the Closing Loopholes Act 2023 on January 1, 2025. Under this new law, a business owner or manager found to be intentionally underpaying employees could face up to 10 years in prison or massive fines, which applies to businesses of all sizes.
Every employer must ask themselves this: Could I or my business be violating the new wage theft laws?
If you’re unfamiliar with Australia’s new wage theft laws or unsure about compliance, this article will refresh your memory.
What Counts as Wage Theft?
Wage theft occurs when an employer retains money that a worker rightfully earned, regardless of the amount or whether or not it was intentional.
According to the law, the following situations constitute wage theft:
- Not paying the minimum wage based on role or experience
- Missing overtime, weekend, or public holiday penalty rates
- Skipping or delaying superannuation payments
- Asking someone to work an unpaid trial shift
- Withholding payslips so employees can’t check their hours, taxes, or super
- Paying in cash without reporting it properly to avoid tax
These actions go against the Fair Work rules and leave workers without full entitlements. You might think this injustice only occurs in large companies, but small businesses and family-run shops often make these same mistakes, mostly because they don’t fully understand modern awards, pay rates, or what’s legally required. However, the law doesn’t excuse ignorance or inexperience when businesses underpay employees and benefit from it.
What Are the New Penalties?
The penalties under Australia’s new wage theft laws are designed to send a clear message that stealing wages is a criminal offense and employers can no longer hide behind excuses.
Individuals (sole traders, business owners, or people directly responsible for paying staff) found guilty of intentionally underpaying employees could face up to 10 years in prison or fines over $1.5 million, even if the amount you underpaid was much smaller.
The punishment for companies can be bigger because the law is structured to hit bigger businesses harder, but it still applies to small ones, and if your company is found guilty of wage theft, you could be fined up to $7.8 million. You could also be fined three times the amount of money you underpaid or 10% of your business’s total turnover.
If your business generates $10 million a year, for example, underpaying one person can lead to a $1 million or more fine, depending on how the court sees your actions.
States like Victoria and Queensland already had criminal wage theft laws before, but it now applies across all of Australia, with consistent federal rules and penalties.
What Steps Can You Take Right Now?
Here’s a simple but essential step-by-step action plan you can follow right now to reduce your risk, fix hidden problems, and ensure your business won’t face serious penalties under the new laws:
1. Audit Your Payroll Thoroughly
Start by reviewing every part of your current payroll setup by comparing the hourly rates, penalty rates, and overtime rules you use with the correct Modern Awards or Enterprise Agreements for your industry and employee roles.
You must also check leave entitlements, casual loadings, public holiday pay, and superannuation to ensure your business pays every worker what the law requires, not just what you’ve always paid or what others in your industry seem to be doing.
You can use the Fair Work Ombudsman’s Pay Calculator or visit Law Tram to find the right employment lawyer to help you match the correct award to each role because misclassifying someone also falls under wage theft.
2. Fix Any Known Underpayments
If your audit reveals that someone has been underpaid recently or in the past, you should calculate the exact shortfall, arrange backpay, and correct their pay going forward before the courts will be far less forgiving if it looks like you ignored known problems or delayed fixing them to save money.
3. Educate Your HR, Payroll, and Management Teams
Take the time to train staff who handle rosters, payroll, timesheets, and contracts, since most cases of underpayment occur because managers don’t usually understand award rules or believe that flat hourly rates “simplify things,” when in fact, oversimplifying pay is one of the biggest compliance risks under the new system.
4. Keep Detailed Payroll Records for at Least 7 Years
The law requires you to keep employee records such as hours worked, pay rates, payslips, leave balances, and superannuation or at least seven years, failure to which is itself a breach that could raise red flags during a workplace audit.
5. Upgrade or Review Your Payroll Software
You should switch to a modern, compliant payroll platform that’s updated regularly and can notify you when award rates change or hours fall outside legal boundaries because older or free payroll systems are not equipped to track these metrics.
These laws apply to every employer, no matter how small your business is, and the government has made it clear that there will be no exceptions for size, industry, or location.
What If I’m Already in Trouble?
If you’re an employer who’s already received a Fair Work notice, is being audited, or has had a complaint filed against you, you don’t have the luxury of panicking because time is of the essence.
The first thing you should do is contact a qualified employment lawyer immediately. You might get tempted to explain things yourself, but a professional legal advisor will guide you through audits, help you respond to official demands correctly, and protect your rights at every step.
A skilled lawyer can also defend you against criminal allegations if the situation escalates because, under the new laws, investigators will look at the intent. How you respond now will influence whether your case is treated as a mistake or a potential crime, even if you didn’t mean to underpay.
If you’re still unsure about where you stand, if your payroll and practices are legally compliant, or if you’ve already received a notice, Visit Law Tram to find the right employment lawyer and get a head start on fixing problems before they become criminal charges.