• 20 February, 2025

Wage Theft Now Attracts Criminal Liability: What Small Businesses Need to Know

From 1 January 2025, major changes to the Fair Work Act 2009 have come into effect — and they are a game-changer for Australian businesses.

👉 Wage theft is now a criminal offence.

This means that employers who intentionally underpay their employees could face serious legal consequences, including criminal prosecution.

In this guide, we explain what wage theft means, what has changed, and how your business can stay compliant.

❗ What Is Wage Theft?

Wage theft occurs when an employer fails to pay employees their correct entitlements under:

• Modern awards
• Enterprise agreements
• The Fair Work Act

This includes underpayment of:

• Minimum wages
• Overtime rates
• Penalties and loadings
• Allowances

👉 Intentional underpayment is now a criminal offence
👉 Unintentional errors still attract civil penalties

⚠️ Why This Change Matters for Small Businesses

Regulators are taking a much stricter approach.

Businesses are now facing:

• Increased audits from the Fair Work Ombudsman
• Heavier financial penalties
• Greater reputational damage

Even small payroll errors can lead to serious consequences if not addressed properly.

📘 Voluntary Small Business Wage Compliance Code

To support small businesses, the Fair Work Ombudsman has introduced the:

✅ Voluntary Small Business Wage Compliance Code

This code applies to businesses with fewer than 15 employees and provides guidance on avoiding criminal liability.

👉 If a small business follows the Code, the Ombudsman cannot refer the matter for criminal prosecution (in certain cases).

Even if you don’t qualify as a small business, the Code is a best-practice framework for all employers.

🛡️ How to Reduce the Risk of Wage Theft Penalties

Before Any Issue Arises

Take proactive steps to ensure compliance:

✔ Review modern awards and pay conditions carefully
✔ Classify employees correctly
✔ Stay updated with Fair Work legislation changes
✔ Seek advice from payroll or compliance experts
✔ Use reliable payroll systems

After Identifying an Underpayment

Act quickly to reduce your risk:

✔ Repay employees immediately
✔ Fix payroll systems and processes
✔ Conduct internal audits
✔ Document all corrective actions

👉 Taking early action shows good faith and may reduce penalties.

📉 When Are You Less Likely to Face Criminal Charges?

You may avoid criminal prosecution if:

• The underpayment was an honest mistake
• You made reasonable efforts to comply with the law
• The issue was found through a voluntary audit
• You took immediate corrective action

📊 The Importance of Payroll Compliance

Australia’s payroll and employment laws are complex — and mistakes are common across all industries.

However, being proactive can help you:

• Avoid penalties and legal action
• Protect your business reputation
• Build trust with employees
• Ensure long-term business stability

💡 Best Practices for Employers

To stay compliant in 2026 and beyond:

✔ Conduct regular payroll audits
✔ Maintain accurate employee records
✔ Use updated payroll software
✔ Train your HR and payroll teams
✔ Work with experienced professionals

🧾 The Bottom Line

The introduction of criminal penalties for wage theft marks a major shift in Australia’s employment laws.

👉 Employers must take payroll compliance seriously
👉 Even small mistakes can have big consequences

The safest approach is to stay informed, act early, and seek expert support when needed.

📞 Have Any Questions?

At Workpaper Solutions Pty Ltd, we help businesses stay compliant with payroll and workplace laws.

✔ Payroll setup & compliance
✔ Wage audits & risk assessment
✔ Bookkeeping & reporting support
✔ Ongoing advisory services

📞 0485 825 915
📧 info@workpaper.com.au

📍 7 Bridge St, Werribee, Victoria 3030 Australia
🌐 https://workpaper.com.au/