FairCheckCriminal underpayment › The Code

The Voluntary Small Business Wage Compliance Code

It is a safe harbour from criminal prosecution for small employers. The Fair Work Ombudsman cannot refer a small business employer's conduct for possible criminal prosecution if it is satisfied the employer complied with the Code in relation to an underpayment.

A small business employer complies if they did not intend to underpay, assessed across a set of factors that amount to ordinary good practice. It is not a checklist, no single factor is decisive, and it does not stop civil enforcement or remove the obligation to repay.

Sourced from the Fair Work Ombudsman's published guidance, Fair Work Act 2009 sections 327A to 327B and the Voluntary Small Business Wage Compliance Code Declaration 2024, checked 2 September 2026. General information, not legal advice.

Who it applies to

A small business employer is an employer with fewer than 15 employees at a particular time. Three details in that definition do real work:

If you sit anywhere near 15, this is worth working out properly and recording, before you ever need to rely on it.

The factors the Ombudsman weighs

The Code asks whether the underpayment was intentional, and answers that by looking at the whole picture. These are the factors set out in the Code.

FactorWhat it looks like in practice
Took reasonable steps to work out correct pay rates and entitlementsChecking the relevant award or enterprise agreement, or confirming the National Minimum Wage Order applies
Made reasonable effort to stay up to date with changes to obligationsSubscribing to Fair Work email updates so award changes and rate increases are not missed
Checked and relied on employee information reasonably believed to be accurateConfirming an employee is classified correctly for their role and duties, or paid correctly for their age
Sought information or advice from a reliable sourceAdvice from an employer association, a lawyer, the Fair Work Ombudsman or the Fair Work Commission
Gave accurate information when seeking that adviceProviding the correct classification and age when asking the question, so the answer is usable
Took steps to fix the underpaymentRepaying as soon as possible and preventing the same issue recurring
Cooperated with any inquiry or investigationResponding to calls and emails and engaging throughout
Other relevant factorsWhat led to the underpayment, or how it came to light, such as a payroll error found in a quarterly audit

Read that list again and notice what it rewards. Almost every factor is about process: did you check, did you keep checking, did you ask someone credible, did you act when you found out. None of it requires you to have been right.

The uncomfortable implication

The factors are evidentiary. Each one is something you either can or cannot demonstrate after the fact.

"We checked the award" is a claim. A dated record showing which award you checked, which classification you assigned, what you concluded and when you last reviewed it, is evidence. When the Ombudsman is deciding whether it is satisfied the Code was complied with, those are not the same thing.

The businesses most exposed here are not the ones doing something wrong on purpose. They are the ones doing everything informally, in someone's head, with nothing written down.

What the Code does not do

Protects againstDoes not protect against
Referral for criminal prosecutionCompliance notices
Enforceable undertakings
Civil litigation and civil penalties
The obligation to repay the employee

One more consequence that is easy to miss: if the Ombudsman is satisfied a small business employer complied with the Code, it cannot also enter a cooperation agreement with that employer about the same conduct. That is not a penalty, it is simply that the Code protection already covers the ground a cooperation agreement would.

How you find out

The Fair Work Ombudsman gives the employer written notice of its decision on whether the Code has been satisfied, either way. The Code also does not affect any of the Ombudsman's other powers or functions, or the powers of its inspectors.

The Ombudsman publishes a Guide to paying employees correctly and the Voluntary Small Business Wage Compliance Code, with a checklist, case studies and best practice tips. If you are a small employer, it is the single most useful free document on this topic and it is worth reading in full.

Common questions

Who counts as a small business employer for the Code?

An employer with fewer than 15 employees at a particular time. Employees of associated entities of the employer are included in the count. Casual employees are not counted unless they are engaged on a regular and systematic basis. Because the test applies at a particular time, a business sitting near the threshold can move in and out of small business status, so the headcount at the time of the conduct is what matters rather than an average or a headcount taken today.

Does complying with the Code mean no penalty at all?

No. The Code only blocks a referral for criminal prosecution. Civil actions remain available, including a compliance notice, an enforceable undertaking and litigation, and civil penalties may still apply. The obligation to repay the employee is unaffected. There is also a practical consequence worth knowing: if the Fair Work Ombudsman is satisfied a small business employer complied with the Code, it cannot then enter into a cooperation agreement with that employer about the same conduct, because the Code protection already applies.

Do you have to meet every factor in the Code?

No. The Fair Work Ombudsman states that the Code is not a checklist, that an employer does not need to show they meet all the factors, and that there is no single factor that must be met. Where an underpayment has occurred the Ombudsman looks at the overall picture and the particular circumstances of the business to decide whether the Code has been satisfied. The employer is then given written notice of the decision either way.

Most of the Code is evidence you either have or you do not

Reasonable steps to work out correct rates, staying current with changes, checking classifications, acting on what you find. FairCheck does those checks against the award that actually applies and leaves a dated record of each one. In beta now, with early access opening to the waitlist first.

Join the waitlist The criminal offence explained

FairCheck provides general information about Australian pay rules and does not provide legal advice, and nothing here guarantees that the Fair Work Ombudsman will be satisfied the Code has been complied with in any particular case. Download the Code and the Ombudsman's Guide, and obtain legal advice on any specific exposure. Official information is available at fairwork.gov.au.