Wage Theft Is Now a Crime
Since 1 January 2025, intentionally underpaying an employee is a criminal offence in Australia. It is called wage theft, and it can bring heavy fines and, for individuals, prison. The wage theft offence is set out in section 327A of the Fair Work Act.
Read the next line carefully, because it matters. Wage theft is about intent. Honest mistakes and genuine miscalculations are not the crime. The Fair Work Ombudsman has made it plain that genuine mistakes will not be prosecuted.
That said, all underpayments are still unlawful. If you get pay wrong by accident, you must fix it and back-pay, and you can still face civil penalties. Wage theft adds a criminal layer on top for employers who do it on purpose.
This lands squarely on trades and services. Awards in building, plumbing, electrical and vehicle work are complex, with allowances, penalty rates and overtime that are easy to get wrong. The risk is not honest error. The risk is looking the other way.
Start here:
Pay every worker at least the correct award rate, on time, with the right allowances and super.
Check your pay against the current award using the Fair Work Ombudsman tools.
If you find an underpayment, fix it quickly and keep a record of what you did.
Keep the evidence that shows your pay decisions were made in good faith.
If you read nothing else, read those four points. They hold the core of staying clear of wage theft. The sections that follow explain the offence, what intent means, the penalties, and the safe harbour built for small business.
Free Resource: Wage Compliance and Safe Harbour Checklist
A practical checklist for trades and services businesses and other small employers. Use it to pay correctly, and to build the good-faith record that keeps honest employers clear of the wage theft offence.
Digging Deeper
What the wage theft offence actually is
Wage theft is set out in section 327A of the Fair Work Act. In plain terms, an employer commits the offence if they intentionally do something or fail to do something that results in not paying an employee the required amount in full by the due date.
The required amount is broad. It covers wages, penalty rates, overtime, allowances, leave entitlements and superannuation. If it is owed under the Fair Work Act, an award or an agreement, it counts. That breadth is what makes wage theft a whole-of-payroll concern.
The offence began on 1 January 2025. It is not retrospective, so it applies to conduct from that date. A pattern of underpayment that starts before and continues after can still be caught.
Intent is the whole game
This is the part that should reassure honest employers. To prove wage theft, a court must be satisfied beyond reasonable doubt that the underpayment was intentional. Carelessness or a genuine error is not enough for the crime. Wage theft requires a deliberate choice to short-change a worker.
So the line runs between deliberate and honest. Knowingly paying under the award is wage theft. Misreading a tricky allowance and fixing it when you notice is not.
The catch is practical. If an underpayment surfaces, you want to be able to show it was honest. That means keeping records of how you worked out pay, the advice you relied on, and what you did when you found a problem.
The penalties, and who is on the hook
The penalties for wage theft are serious, by design. They are meant to deter deliberate underpayment, which was once treated as a cost of doing business.
For a company, the maximum fine is the greater of three times the underpayment or a cap in the millions of dollars.
For an individual, up to 10 years in prison, and a large fine on top.
Individuals can include directors, owners and payroll decision makers, not just the business.
Penalty amounts are set by penalty units and indexed, so confirm the current figure before you rely on it. The headline point stands. Wage theft is no longer a slap on the wrist.
Why trades and services need to look closely
Few sectors carry more pay complexity than trades and services. Site allowances, travel and tool allowances, apprentice rates, overtime and weekend penalties all stack up. A cash-in-hand habit or a rough estimate can quietly become an underpayment.
None of that is criminal if it is honest. The danger is the grey zone: paying a flat rate you know is under the award, or classifying an apprentice low to save money. That is where honest error ends, and wage theft risk begins.
The fix is not complicated. Price your jobs on the real cost of labour, including the award entitlements, and pay accordingly. It protects your workers and you. Done well, wage theft never enters the picture.
The small business safe harbour
There is real protection built in for small business. If you employ fewer than 15 people, you can rely on the Voluntary Small Business Wage Compliance Code.
Here is how it helps. If the Fair Work Ombudsman is satisfied you complied with the Code in relation to an underpayment, it cannot refer you for criminal prosecution for that underpayment. In short, honest effort shields you from the wage theft offence.
The Code is not a tick-box test. You comply if you did not intend to underpay, judged on the overall picture. The factors are sensible steps that good employers already take, such as checking the award, using the Ombudsman’s pay tools, seeking advice, and promptly fixing errors. Larger employers have a similar path through a cooperation agreement, by self-disclosing to the Ombudsman. Either way, the goal is the same: to keep honest employers clear of wage-theft charges.
If you spot an underpayment
Finding a mistake is not wage theft. How you respond is what counts.
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Work out who was affected, and by how much.
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Back-pay the shortfall, including super where relevant.
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Record what happened, why, and how you fixed it.
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Review the process so it does not happen again.
Acting promptly and keeping the evidence are exactly what support an honest position, and for small businesses, they go to the heart of the Code. Fixing an error in good faith is the opposite of wage theft.
The bigger picture
Australia has caught up with a wider shift. Some states, including Victoria and Queensland, had already criminalised wage theft, and the national offence now applies nationwide. Overseas, governments have also moved to treat deliberate underpayment as a serious wrong rather than a civil footnote.
The direction is clear. Underpayment is no longer low risk, and the community expects workers to be paid what they are owed. For trades and services, the message is steady and fair. Pay correctly, keep good records, and act quickly on errors, and wage theft is not your problem.
SBAAS helps trades and services businesses and other small employers get pay right and stay on the right side of these laws. If you would like to review your pay practices or have found a problem and need a clear path forward, we can help. Learn more about how we work at https://sbaas.com.au/about-us/ and start the conversation.
Free Resource: Wage Compliance and Safe Harbour Checklist
A practical checklist for trades and services businesses and other small employers. Use it to pay correctly, and to build the good-faith record that keeps honest employers clear of the wage theft offence.
Sources
Fair Work Ombudsman. (2025). Criminalising wage underpayments and other issues. https://www.fairwork.gov.au/about-us/workplace-laws/legislation-changes/closing-loopholes/criminalising-wage-underpayments-and-other-issues
Fair Work Ombudsman. (2025). Voluntary Small Business Wage Compliance Code. https://www.fairwork.gov.au/about-us/compliance-and-enforcement/criminal-prosecution/voluntary-small-business-wage-compliance-code
Fair Work Ombudsman. (2026). Criminal prosecution. https://www.fairwork.gov.au/about-us/compliance-and-enforcement/criminal-prosecution
Federal Register of Legislation. (2024). Fair Work Act 2009 (Cth). https://www.legislation.gov.au/C2009A00028/latest/text
Eric Allgood is the Managing Director of SBAAS and brings over two decades of experience in corporate guidance, with a focus on governance and risk, crisis management, industrial relations, and sustainability.
He founded SBAAS in 2019 to extend his corporate strategies to small businesses, quickly becoming a vital support. His background in IR, governance and risk management, combined with his crisis management skills, has enabled businesses to navigate challenges effectively.
Eric’s commitment to sustainability shapes his approach to fostering inclusive and ethical practices within organisations. His strategic acumen and dedication to sustainable growth have positioned SBAAS as a leader in supporting small businesses through integrity and resilience.
Qualifications:
- Master of Business Law
- MBA (USA)
- Graduate Certificate of Business Administration
- Graduate Certificate of Training and Development
- Diploma of Psychology (University of Warwickshire)
- Bachelor of Applied Management
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- Small Business Association of Australia –
International Think Tank Member and Sponsor - Australian Institute of Company Directors – MAICD
- Institute of Community Directors Australia – ICDA
- Australian Human Resource Institute – CAHRI
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