From 1 January 2025, employers who intentionally underpay employees (wage theft) could face criminal charges, with severe penalties including fines up to $7.825 million and 10 years’ imprisonment for individuals. These new laws reinforce the need for strict payroll compliance and proactive risk management.
What the New Laws Mean for Employers
Under the changes, an employer commits an offence if they:
- Intentionally fail to pay an employee their full entitlements on or before the due date.
- Operate in a corporate culture that encourages, tolerates, or fails to prevent wage underpayment.
Unlike civil breaches, criminal cases will be prosecuted by the Director of Public Prosecutions or the Australian Federal Police, and guilt must be proven beyond reasonable doubt.
Who Can Be Held Liable?
Employers, directors, and senior managers can be found guilty if they:
- Knowingly or recklessly engaged in underpayment.
- Authorised, permitted, or encouraged wage theft.
- Failed to create a culture of compliance, unless they can prove due diligence was exercised to prevent underpayment.
Individuals (including HR and payroll personnel) can also be charged as accessories if they are found to have aided, abetted, or been reckless about wage underpayment.
Penalties for Wage Theft
🔹 For companies: Fines of up to $7.825 million or three times the underpayment amount.
🔹 For individuals: Up to 10 years in prison and/or fines of the greater of $1.565 million or three times the underpayment amount.
What Employers Should Do Now
To mitigate the risk of underpayment and protect your business, take proactive steps:
- Audit Payroll & Entitlements – Regularly review payslips and payroll systems for compliance.
- Keep Records Up to Date – Ensure employee details, classifications, and work hours are accurately recorded.
- Train Leadership & Payroll Teams – Educate boards, managers, and payroll personnel on the legal risks of underpayment.
- Seek Expert Advice – If unsure about entitlements, seek professional guidance to confirm compliance.
- Demonstrate Due Diligence – Take proactive steps to identify and correct payroll errors before they escalate.
Need Support?
With these harsh new penalties, now is the time to review your payroll processes and ensure full compliance.
If you have any questions or need a compliance review, the team at Business 360 is here to help. Contact us on 1300 287 360.