When Wage Theft Became a Crime — What That Means for Employers

As of 1 January 2025, intentional wage theft, that is, deliberately underpaying staff, falsifying records or failing to meet minimum entitlements under the Fair Work Act 2009 (Cth) (FW Act), became a criminal offence in Australia.

Under the new laws, employers found guilty of intentionally underpaying employees (wages superannuation or other award/enterprise-agreement entitlements) risk severe penalties. For a company, the maximum fine is the greater of three times the amount of the underpayment or about AUD $7.8 million–$8.25 million (depending on how the Court quantifies the underpayment). For individuals (eg directors or business owners responsible for the underpayment), the risks are even more serious with up to 10 years’ imprisonment or a fine of at least AUD $1.65 million (or three-times the underpayment amount, if quantifiable).

These reforms reflect an overdue response to what many have long described as a systemic problem in certain sectors where wage underpayment and entitlement exploitation were not the result of mistakes but an entrenched business model.

But the shift isn’t just about penalties. It provides a strong regulatory signal that accurate payroll systems, proper record-keeping, transparent processes and genuine compliance are now non-negotiables. They are not just civil-law obligations but now matters of criminal law.

Why This Change Matters

For business owners, HR managers and boards, the risks are multifaceted:

• Financial risk — there are now multi-million-dollar fines, possibly tripling the amount of unpaid wages.
  
  
• Criminal risk — individuals are now personally liable for prison time if they are found to have intentionally underpaid.
  
  
• Reputational risk — media, investors, clients and employees will be watching and a wage-theft scandal can destroy trust.
  
  
• Operational risk — lengthy investigations, compliance notices, forced audits and disruptions can be costly.
  
  
• Governance exposure — boards and directors must be satisfied their business meets modern compliance and ethical standards.
  
  

Record Fines in Underpayment Cases

Though the criminal offence only began on 1 January 2025, some earlier underpayment cases have already resulted in record fines and litigation outcomes, offering a preview of the risks for non-compliant employers.

1. Sushi Bay — $15.3 million penalty for deliberate exploitation

In August 2024, the Fair Work Ombudsman (FWO) secured a record penalty of $15.3 million against the former operators of Sushi Bay outlets in NSW, Darwin and Canberra, for underpaying 163 workers (mainly migrant visa-holders) more than $650,000 and falsifying payroll records to hide the conduct.

Workers were paid flat casual rates for what should have been overtime, weekend or public holiday penalty rates with individual underpayments ranging from about $48 to nearly $84,000.

Justice Anna Katzmann described the conduct as “calculated and audacious”, noting the payroll practices were intentionally designed to avoid compliance.

While this case predates the 2025 criminal-offence regime, it demonstrates the scale of penalties courts will impose where there is systematic underpayment and deliberate deception and shows how regulators and courts are ready to treat wage exploitation as a serious business risk. The financial and reputational consequences were substantial and they send a clear warning to employers.

2. 2024–25 Annual Report: $358 million recovered across Australia

According to the FWO’s 2024–25 Annual Report, more than $358 million was recovered for over 249,000 underpaid workers during that financial year, taking the total over the past five years to $2 billion.

That same year, the FWO secured a record total of $23.7 million in court penalties, the highest in a single financial year and launched 73 new litigations.

While many of these matters were civil underpayment cases, they show both the scale of non-compliance and the regulator’s readiness to act. The shift to criminal liability sharply increases the potential risk for employers going forward, signalling that serious contraventions, especially repeated or deliberate ones, will be treated far more harshly in future.

3. Broader Regulatory Sweep — A Warning to High-Risk Sectors

The FWO has signalled that high-risk sectors, such as fast food, restaurants and cafés, large corporates, aged-care, construction, disability support and universities, will be priorities for enforcement in 2025–26.

In fact, in 2025 the FWO has already issued large numbers of compliance notices, infringement fines for record-keeping and payslip breaches and commenced investigations into multiple employers including large chains and businesses operating in vulnerable-worker sectors.

What these developments reflect is that the regulator isn’t waiting for high-profile scandals and is instead is proactively auditing, investigating and pressuring employers to review and clean up payroll governance across the board.

What Businesses Should Do Now to Protect Themselves

Given the risks, both legal and reputational, and the early signs that regulators are actively enforcing the new laws, here are critical steps all employers should take now:

1. Audit your payroll, payroll systems and record-keeping

• Review pay structures, classifications, penalty rates, overtime, allowances and superannuation obligations.
• Ensure payslips, timesheets and payroll journals reflect actual hours worked, correct classifications and pay rate, and are stored securely.
• Compare your current wage practices against modern awards or enterprise agreements (if applicable).

2. Reconcile superannuation, entitlements, leave loading and other employee benefits

• Underpayment isn’t limited to base wages: it includes overtime, penalty rates, allowances, loadings, super contributions and other entitlements.
• Incomplete or inaccurate superannuation payments now carry greater scrutiny.

3. Train staff and management on entitlements, record-keeping and compliance obligations

• Managers and payroll staff must be aware of their legal responsibilities especially in sectors with irregular hours, overtime or shift work.
• Implement internal controls to prevent falsified records, ‘cash-back schemes’ or misuse of casual labour.

4. Adopt transparent, consistent payroll and administration systems

• Use reliable payroll software with audit trails, permission controls and regular backups.
• Maintain separate and detailed records for all employees.

5. If you’re a small business, consider the Voluntary Small Business Wage Compliance Code

• The Code offers a compliance pathway for small employers (fewer than 15 staff) where genuine efforts to comply may mitigate prosecution risk.
• But ‘honest mistakes’ are only protected if the employer demonstrates diligence and ongoing commitment to compliance.

6. Establish internal review and regular compliance checks

• Conduct regular internal audits (quarterly or semi-annually) to catch payroll issues before they become regulatory problems.
• Use “lessons-learned” from other cases to reinforce compliance culture.

7. Seek legal advice on award coverage, classification, payroll obligations and entitlements

• Complex arrangements such as part-time work, casual loadings, shift work, allowances and overtime often cause the biggest problems.
• Professional advice may cost less than facing penalties, litigation or criminal charges.

Why Compliance Is Also Just Good Business Practice

Beyond legal compliance and risk-management, there are significant business and moral reasons to take wage compliance seriously:

• Trust and reputation — Employees, customers and stakeholders expect fair treatment. Wage-theft scandals erode trust and can damage brand and stakeholder relationships.
  
  
• Employee retention and morale — Fair pay, timely pay, transparency and respect for entitlements encourage loyalty and productivity.
  
  
• Governance and leadership integrity — Directors and senior leaders responsible for compliance signal to investors, boards, lenders and regulators that the company is managed properly.
  
  
• Avoiding cost escalation — Compliance, auditing and system improvements are generally far less costly than litigation, fines or back-pay orders.
  
  
• Promoting fairness and social responsibility — Paying employees correctly is simply the right thing to do.
  
  

Compliance Is Not Optional — It’s Essential

If you run a business in Australia, there are three realities you must accept now:

1. Intentional wage theft can result in criminal charges not just civil penalties.
   
   
2. Regulators are actively enforcing compliance and targeting high-risk industries.
   
   
3. Proper payroll practices, transparent systems, accurate record-keeping and internal audits are no longer optional — they are essential.
   
   

At Aubrey Brown Lawyers, our Commercial team can provide experienced, professional advice to ensure you are fully compliant in your wage obligations. Call our team on (02) 4350 3333 to arrange a confidential meeting.