First, the part most employers actually need to hear
If you are reading this because you have found an underpayment and you are worried, the important distinction is this: the criminal offence requires intent. The Fair Work Ombudsman says so directly, and a criminal prosecution has to be proved beyond reasonable doubt.
Most underpayment in Australia is not deliberate. It comes from awards that are genuinely complex, applied by people who are busy, using systems that do not interpret those awards. A misread classification, a pay template nobody updated on 1 July, an allowance nobody identified: none of that is a crime. It is still a liability, and it still has to be repaid, but it sits in the civil system.
What changed on 1 January 2025 is that the deliberate end of the spectrum now carries prison time.
What the offence actually covers
An employer may commit the offence where they were required to pay an amount and intentionally engaged in conduct that resulted in it not being paid on or before the day it was due. The amounts include:
- Amounts payable to the employee, such as wages and paid leave entitlements.
- Amounts payable on behalf of or for the benefit of the employee, such as superannuation and salary sacrifice arrangements.
Intentional conduct runs both ways. Taking an action, such as knowingly paying below the correct rate or knowingly withholding penalty rates, overtime or allowances. Or failing to take an action, such as deliberately not paying someone at all.
Where the line sits
| Situation | Criminal? | What still applies |
|---|---|---|
| Misread the award and used the wrong classification | No | Back-pay, interest, possible civil penalties |
| Nobody updated pay rates after 1 July | No | Back-pay, interest, possible civil penalties |
| Payroll configured wrongly at setup and never checked | No | Back-pay, interest, possible civil penalties |
| Knowingly paid below the minimum wage to save money | Potentially | Referral, prosecution, fines, prison |
| Knowingly withheld penalty rates required by an agreement | Potentially | Referral, prosecution, fines, prison |
| Deliberately did not pay an employee at all | Potentially | Referral, prosecution, fines, prison |
The distinguishing feature is knowledge and deliberate choice, not the size of the shortfall. A large accidental underpayment is not a crime. A small deliberate one may be.
Who can be prosecuted
An employer can be an individual or a company, and both can be prosecuted. Other individuals and companies can also be prosecuted for conduct relating to the offence, such as aiding an employer in committing it. Depending on involvement, that can reach directors, managers and advisers.
The Fair Work Ombudsman investigates and, where it considers there is sufficient evidence and it is in the public interest, refers suitable matters onward. Only the Commonwealth Director of Public Prosecutions and the Australian Federal Police can start criminal proceedings.
The penalties, in short
For an individual, a court may impose up to 10 years in prison, a fine, or both. For a company the maximum fine is the higher of three times the underpayment or a substantial fixed amount. Full figures, and how the civil side works alongside, are on our penalties page.
The two safe harbours
The Voluntary Small Business Wage Compliance Code. A small business employer, meaning fewer than 15 employees, cannot be referred for criminal prosecution if the Fair Work Ombudsman is satisfied they complied with the Code. It is not a checklist, and no single factor is decisive. See how the Code works.
Cooperation agreements. An employer of any size who voluntarily self-reports conduct that could be a criminal offence can request a written cooperation agreement. While it is in force, the Fair Work Ombudsman cannot refer the conduct it covers for criminal prosecution. See what to do if you find an underpayment.
Both leave civil enforcement available. Neither is a way to avoid repaying employees.
An exception worth knowing about
The criminal provisions do not apply to every entitlement for every employee. Broadly, for employees in New South Wales, South Australia, Queensland, Tasmania and Victoria who are employed by sole traders, partnerships, other unincorporated entities or non-trading corporations, plus most Victorian state government employees and Tasmanian local government employees, the criminal provisions do not apply to superannuation contributions, payment for long service leave, leave connected with being the victim of a crime, or jury duty and emergency services leave.
The criminal provisions still apply to other wages and entitlements for those employees. This is a narrow carve-out about which entitlements are in scope, not a general exemption.
Common questions
Can you be prosecuted for an accidental underpayment?
No. The Fair Work Ombudsman states plainly that the criminal offence does not include honest mistakes. The offence requires intentional conduct, and a criminal prosecution must be proved beyond reasonable doubt. An underpayment caused by a misread award, a payroll misconfiguration or a classification error is not a crime. It does remain a civil matter, so back-pay, interest, compliance notices, enforceable undertakings and civil penalties can all still follow, and the obligation to repay the employee is unaffected.
What counts as intentional underpayment?
Intentional conduct covers both doing something and deliberately not doing something. Taking an action means paying less than an employee's minimum entitlements on purpose, such as knowingly paying below the correct hourly rate or knowingly not paying penalty rates, overtime or allowances. Failing to take an action means deliberately not paying an employee at all. The Fair Work Ombudsman's own example is an employer who paid an employee twelve dollars an hour knowing it was below the minimum wage. What separates this from a mistake is knowledge and deliberate choice, not the size of the underpayment.
Who can be prosecuted for criminal underpayment?
An employer can be either an individual or a company, and both can be prosecuted. Other individuals and companies can also be prosecuted for conduct relating to the offence, such as aiding an employer in committing it, which can reach directors, managers and advisers depending on their involvement. The Fair Work Ombudsman investigates and refers suitable matters, but only the Commonwealth Director of Public Prosecutions and the Australian Federal Police can start criminal proceedings.
The practical protection is a documented checking process
What separates a mistake from a deliberate act, in evidence, is showing you took reasonable steps to get pay right and acted when you found a problem. FairCheck tests pay against the award that actually applies and leaves a dated record of every check. In beta now, with early access opening to the waitlist first.
Join the waitlist If you have found an underpaymentFairCheck provides general information about Australian pay rules and does not provide legal advice. Criminal exposure depends on the specific facts and on evidence of intent. If you think you may have a criminal exposure, obtain independent legal advice before taking action, including before self-reporting. Official information is available from the Fair Work Ombudsman at fairwork.gov.au.