Prison. $7.8 Million Fines. Zero Prosecutions. Are Australia’s Wage Theft Laws All Bark and No Bite?

Eighteen months ago, the Australian Government made wage theft a criminal offence. The headlines were dramatic. Up to 10 years in prison. Fines of $7.8 million for companies. Directors personally liable. It was framed as a watershed moment for Australian workers.

So how many employers have been prosecuted since the law came into force on 1 January 2025?

Zero.

Not one. The Fair Work Ombudsman has opened just two criminal investigations in the entire 18 months the law has been on the books. A Senate inquiry has now tabled its findings, and the verdict is not flattering: the committee is not convinced the criminal offence is having the impact it was anticipated to have.

So what is actually going on? And more importantly, what does this mean for you as an employer right now? Because regardless of how effective the law turns out to be, it is very much in force, and the obligations that come with it are real.

First, the Law Is Real. Do Not Get Complacent.

Before we get into the politics, let’s be clear on what the law actually says. Since 1 January 2025, intentionally underpaying your employees is a criminal offence under section 327A of the Fair Work Act. This is not a civil slap on the wrist. It is a criminal prosecution, with criminal-standard penalties.

The offence covers wages, penalty rates, overtime, allowances, leave loading, redundancy pay, and superannuation. It applies to national system employers across Australia, and it covers both companies and individuals, meaning directors, managers, and payroll staff can be personally on the hook.

The keyword throughout the legislation is intentional. The law is designed to catch employers who know what they owe and choose not to pay it. Genuine mistakes, payroll system errors, and honest misreadings of a complex award are civil matters, not criminal ones.

But here is the bit most employers miss: wilful blindness counts. Deliberately choosing not to check the correct rate is not a defence. And if an employee raises an underpayment concern and you do nothing about it, that honest mistake can quickly become something far more serious.

The criminal penalties (confirmed) •        Individuals (directors, managers, payroll staff): up to 10 years imprisonment and/or the greater of $1.565 million or 3x the underpayment amount •        Body corporates: the greater of $7.825 million or 3x the underpayment amount •        Civil penalties still apply for accidental underpayments: up to $495,000 per contravention for non-small businesses, or 3x the underpayment (whichever is greater) •        Serious civil contraventions: up to $4.95 million per contravention for non-small businesses •        Each underpaid employee, and potentially each pay period, can be a separate offence Source: Fair Work Act 2009 (Cth) s327A; Fair Work Ombudsman; confirmed by multiple law firm sources.

So Why Has Nobody Been Prosecuted?

The Senate inquiry asked exactly this question. The Fair Work Ombudsman’s answer was essentially: give it time. Criminal investigations take years to build, and 18 months is not long enough to see prosecutions come through the system.

But the committee was not entirely satisfied with that explanation. Evidence from unions, community legal centres, and academics about whether the law is even deterring bad behaviour was, in the committee’s words, conflicted.

Tess Hardy, director of the Centre for Employment and Labour Relations Law, put it bluntly in evidence to the inquiry: criminal sanctions only get you so far when it comes to deterrence. The research suggests that what actually shapes employer behaviour is the perceived risk of being detected, not the existence of criminal penalties on paper.

And then there is the structural problem the committee called out directly: even courts struggle to interpret particular entitlements correctly under modern awards and enterprise agreements. The system is so complex that compliance is genuinely difficult for employers who are actually trying. The criminal law, as the committee noted, is directed at a narrow category of deliberate conduct, while the structural driver of most underpayments, which is the sheer complexity of the award system, has barely been addressed.

That is a damning finding. The committee went as far as questioning whether the almost $50 million provided to the Fair Work Ombudsman to administer the criminal offence is an effective use of taxpayer dollars.

What the Inquiry Recommends

The majority report, led by Liberal senators, recommends the Government:

• Make modern awards clearer, simpler, and written in plain English, with clearer classification structures and more accessible guidance
• Clarify how the criminal offence interacts with the Criminal Code, particularly the availability of a due diligence defence for corporate employers
• Review whether the Fair Work Ombudsman’s resources are delivering the fastest possible repayment for underpaid workers, rather than sitting in an under-utilised criminal enforcement function

Labor senators rejected the majority report, arguing it failed to engage with evidence about the offence’s emerging deterrence effect and the strong support for it from unions and community legal centres. Independent Senator Fatima Payman went further, recommending superannuation underpayments be included in the wage theft framework, a small claims jurisdiction where unions can initiate proceedings, and increased civil penalties across the board.

A separate independent review led by former Fair Work Commissioner Susan Booth is also underway. More change is coming. The question is which direction it goes.

What This Means for SME Employers Right Now

Here is our take: do not let the zero prosecution figure lull you into a false sense of security. The law is real. The obligations are real. And the civil penalty regime for accidental underpayments, which applies to every employer regardless of intent, has teeth that are already being used.

Focus on these five things.

1. Know your awards and classifications

The biggest risk for most SMEs is not deliberate wrongdoing. It is applying the wrong award, miscategorising employees, or missing a classification change. The line between intentional and unintentional is everything under this law, and good records are what prove which side of it you are on.

2. Do a payroll audit now

Award rates change every 1 July. If you have not reviewed your payroll against current rates recently, do it before the next cycle hits. An underpayment that started before January 2025 but continues after it can form part of a course of conduct that brings the criminal provisions into play.

3. Small business? Use the safe harbour

If you have fewer than 15 employees and can demonstrate compliance with the Voluntary Small Business Wage Compliance Code, you cannot be referred for criminal prosecution for unintentional underpayments. This is a genuine protection, but only if you can actually show you followed the Code. Keep the records, check the FWO website, and get advice when you are unsure.

4. Find a problem? Self-report it.

The Fair Work Ombudsman offers cooperation agreements for employers who proactively come forward. Self-reporting is treated very differently to being caught. If you discover an underpayment, do not sit on it. Get HR and legal advice immediately, then move.

5. Get super right, every quarter

Late superannuation is one of the most common breaches and one of the easiest to fix. The ATO and Fair Work now share data through Single Touch Payroll, making it far easier to identify non-compliance. Super must be paid on time, every quarter, at the correct rate. The rate has been 12 per cent since 1 July 2025. Payday super reforms requiring payment with every pay run are also coming, so now is the time to get your systems right.

The HR Gurus take Are the wage theft laws a toothless tiger? Right now, arguably yes on the criminal side. Zero prosecutions in 18 months is not nothing; it is a signal. But that does not mean the risk is gone. The civil penalties are very much active, the FWO’s investigative powers have expanded, and data-matching between the ATO and Fair Work means underpayments are easier to detect than ever. The employers who get caught out will not be the ones who deliberately ripped off their staff. They will be the ones who meant to get it right but never properly checked. That is the group we spend most of our time helping.

Frequently Asked Questions

Not sure if your payroll is compliant?

We can run a payroll compliance review, check your award classifications, and make sure you have the right systems and records in place before someone else finds a problem for you. Book a call with the HR Gurus team today.