Criminal penalties
These apply only to the intentional underpayment offence in force since 1 January 2025. They do not apply to honest mistakes.
| If the underpayment can be calculated | If it cannot be calculated | Prison | |
|---|---|---|---|
| Company | The higher of 3× the underpayment or $9.1 million | $9.1 million | Not applicable |
| Individual | The higher of 3× the underpayment or $1.82 million | $1.82 million | Up to 10 years |
Note the structure. The fine is not capped at the fixed figure, it is the higher of the two, so it scales with the size of the underpayment. A court may impose a fine, prison time, or both.
Civil consequences, which are the ones most employers will meet
An honest mistake is not a crime, but it is not consequence free. The Fair Work Ombudsman has a ladder of civil enforcement options, and these remain available even where a safe harbour blocks a criminal referral.
| Action | What it is | When it tends to be used |
|---|---|---|
| Back-pay and interest | Repaying what was owed | Always. This is not a penalty, it is the debt |
| Compliance notice | A formal direction to fix a contravention | Where a contravention is identified and can be rectified |
| Enforceable undertaking | A binding written commitment to rectify and improve | Where an employer cooperates and commits to change |
| Civil litigation | Court proceedings seeking civil penalties | More serious or systemic contraventions |
Civil penalty amounts under the Fair Work Act are higher for serious contraventions and for larger employers, and the maximum amounts changed from 1 July 2026. Because the Fair Work Ombudsman has flagged that its published materials are under review, we are not publishing civil penalty figures here rather than risk quoting stale numbers. Check the current amounts directly with the Ombudsman.
The number that actually determines the cost
In practice, the size of an underpayment liability is rarely driven by the amount in any one pay period. It is driven by two multipliers: how long the error ran, and how many people it touched.
A configuration error worth twenty dollars a fortnight, affecting fourteen people, running for four years, is a little over twenty-nine thousand dollars in wages before interest. Nobody noticed it, because on any single payslip it was twenty dollars.
| Factor | Detail |
|---|---|
| Recovery window | Generally six years from when the entitlement fell due |
| Record keeping | Employee records must be kept for seven years |
| Missing records | A reverse onus can apply, so the employer may have to disprove the alleged underpayment |
That last row is the one worth sitting with. If you cannot produce adequate records, you can end up arguing against a claimed figure without the evidence to rebut it.
What reduces exposure
- Finding it yourself. How an underpayment came to light is a factor the Ombudsman considers. A payroll error identified in your own audit reads very differently to one identified by an employee complaint.
- Fixing it promptly, and taking steps to stop it recurring.
- Cooperating with any inquiry or investigation.
- Being able to show reasonable steps were taken to get pay right in the first place: which award you checked, how you classified people, when you last reviewed rates.
- For fewer than 15 employees, satisfying the Voluntary Small Business Wage Compliance Code, which blocks a criminal referral entirely.
Common questions
How is the maximum fine for criminal underpayment calculated?
The fine is the higher of two amounts, so it scales with the size of the underpayment. For a company, where the court can determine the underpayment amount, the maximum is the higher of three times that amount or $9.1 million, and where the amount cannot be determined the maximum is $9.1 million. For an individual the equivalent figure is the higher of three times the underpayment or $1.82 million, alongside up to 10 years imprisonment. These are the amounts published by the Fair Work Ombudsman as at 2 September 2026, and the Ombudsman has noted that maximum penalty amounts increased from 1 July 2026 and some resources are under review, so the current figures should be confirmed before being relied on.
How far back can underpaid wages be recovered?
The general limitation period for recovering underpaid wages through the courts under the Fair Work Act is six years from the date the entitlement fell due. Employers must separately keep employee records for seven years. Where an employer cannot produce adequate records, a reverse onus can apply, meaning the employer may have to disprove the alleged underpayment rather than the employee having to prove it. This is why the real cost of an underpayment is usually driven by how long it ran and how many people it touched, rather than by the amount in any single pay period.
Does repaying an underpayment avoid a penalty?
Repaying does not automatically remove the possibility of enforcement action, but it matters a great deal. Rectifying an underpayment promptly and taking steps to prevent it recurring are among the factors the Fair Work Ombudsman weighs, and for a small business employer they are factors in the Voluntary Small Business Wage Compliance Code, which if satisfied prevents a referral for criminal prosecution. Repayment is also unavoidable in its own right, since the wages are owed regardless of what penalty does or does not follow.
The cheapest version of this problem is the one you find first
Every multiplier above is a function of time. FairCheck checks pay against the award that actually applies each cycle, so an error surfaces in a pay run rather than four years later in a claim. 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. Penalty amounts are set by legislation and change, including with penalty unit indexation. Confirm current figures with the Fair Work Ombudsman at fairwork.gov.au and obtain legal advice on any specific exposure.