Criminalising Intentional Wage Underpayments in 2025: What Business Owners Need to Know 

Starting January 1, 2025, new legislation will criminalise the intentional underpayment of wages by employers. Employers will be committing this offence if they are required to pay wages or superannuation to an employee under the Fair Work Act or an industrial instrument and they deliberately underpay the required amount before the due date. This is important for business owners because it underscores the severe consequences of failing to meet payment obligations to employees.

Significant financial penalties and the potential for imprisonment highlight the critical need for compliance with wage and superannuation requirements. Understanding these risks helps business owners prioritise accurate and timely employee payments, thereby avoiding legal issues and protecting their company’s reputation. 

The new law will only apply to underpayments occurring after January 1, 2025, regardless of whether the conduct began before this date. 

Penalties for Non-Compliance 

Companies prosecuted for underpayment can face penalties amounting to three times the underpaid amount, if the court can determine it, or $7.825 million, whichever is greater. If the court cannot determine the underpayment amount, the maximum penalty is $7.825 million. 

Individuals can be imprisoned for up to 10 years and fined either three times the underpaid amount, if the court can determine it, or up to $1.565 million, whichever is greater. They can also face both fines and imprisonment.  

The Fair Work Ombudsman will be responsible for investigating suspected underpayment offenses, making it imperative for businesses to adhere strictly to these legal requirements. 

The Importance of Payroll Audit  

Payroll audits are an essential tool for employers to ensure their employees are properly compensated and to mitigate the risks associated with the new wage underpayment laws. By conducting thorough and systematic reviews of payroll processes, audits help verify that all wage payments comply with the Fair Work Act and relevant industrial agreements. These audits can identify discrepancies or errors in wage calculations and payments, allowing employers to correct issues promptly and avoid potential legal penalties.

By regularly auditing payroll systems, employers can maintain accuracy and compliance, significantly reducing the risk of intentional underpayments and the severe penalties associated with them. Payroll audits provide a robust mechanism for safeguarding against legal risks and fostering a fair and lawful workplace. 

Payroll Audit and Remediation All in One Place

At IRiQ Law, our multidisciplinary team of lawyers, IR practitioners, and data analysts delivers cost-effective payroll audits and remediation—allowing you to make strategic and informed decisions with certified results. With years of practical experience and legal expertise, we can help your organisation avoid financial, criminal, and reputational risks associated with wage theft and unfair working conditions.

Contact IRiQ Law to schedule your payroll audit or for more information.

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