The maximum civil penalty for underpaying an employee in Australia is now up to $495,000 per contravention for an individual, or three times the underpayment — whichever is greater. For serious contraventions, the ceiling rises to $4,950,000. These figures apply to contraventions occurring on or after 27 February 2024 under the Closing Loopholes amendments.
Before that date, the maximum was much lower. A lot of outdated blog content still quotes $93,900 per breach. That figure is wrong for any conduct from 27 February 2024 onward. If you are reading guidance that still uses the old number, it has not been updated for the current law.
On top of the higher civil ceiling, intentional underpayment has been a criminal offence since 1 January 2025. That is a different thing again — criminal conviction, fines and potential imprisonment, in addition to any civil penalty.
The civil penalty regime
Civil penalties are imposed by a court under the Fair Work Act. They are separate from the back-pay the employer must also pay the employee. The Fair Work Ombudsman prosecutes civil matters and publishes outcomes on its litigation page.
The maximums as they stand today:
- Standard contraventions: up to $495,000 per contravention for an individual, or the greater of $495,000 or three times the underpayment amount.
- Serious contraventions (deliberate and systemic): up to $4,950,000 for an individual.
- Higher maximums apply to corporations.
See the Fair Work Ombudsman’s criminalising wage underpayments page for the full legislative background.
The criminal wage-theft offence
From 1 January 2025, intentional underpayment of wages or entitlements is a criminal offence. See the Fair Work Ombudsman’s summary of the new laws.
Key points:
- The offence targets intentional conduct — it is not about honest mistakes.
- Convictions can include fines, imprisonment, or both.
- The FWO investigates and can refer matters for criminal prosecution. See the criminal prosecution page.
- The Voluntary Small Business Wage Compliance Code protects compliant small businesses from referral (covered below).
What Fair Work can actually do
Penalties sit at the top of a ladder of enforcement tools. The FWO works through several stages before it gets to a court-ordered penalty:
- Compliance notices: the FWO issues a formal notice requiring the employer to calculate and pay back the underpayment. Non-compliance with the notice is itself a separate contravention.
- Enforceable undertakings: the employer signs a legally binding agreement to pay back wages, fix systems, and often retain an external auditor.
- Back-pay orders: a court orders the employer to repay what is owed, plus interest.
- Civil penalty orders: the court imposes a monetary penalty on top of the back-pay.
- Restraining orders: courts can prevent an individual from running a business or employing staff.
- Criminal referral: for intentional conduct, the matter can be referred for criminal prosecution.
See the FWO compliance and enforcement hub for the full framework.
Reputational damage: the media release
Every successful FWO litigation is published as a media release, naming the employer and the directors. These releases are indexed by Google and often the first result when someone searches the business name. See the FWO’s litigation page for current examples.
For a small business, a “named and shamed” outcome is often a bigger commercial problem than the penalty itself — it damages supplier and customer trust for years.
How employees bring cases
Most FWO investigations start with a complaint from a current or former employee. The FWO also accepts anonymous tip-offs, including from other workers, customers and competitors. See the anonymous tip-off page.
The FWO recovered $509 million for 251,475 underpaid workers in 2022–23. See the 2022–23 annual report media release.
The Voluntary Small Business Wage Compliance Code
The Voluntary Small Business Wage Compliance Code is a practical safeguard against criminal referral for small businesses that have genuinely tried to comply.
It is not automatic. To rely on it, you need to demonstrate that you:
- Took reasonable steps to work out the correct pay — award classification, pay rates, penalty rates and allowances.
- Kept records of those steps.
- Acted promptly to correct any underpayment when it was identified.
If the FWO accepts that you complied with the Code, any underpayment will be treated as a civil matter rather than a criminal one.
How to protect yourself: a practical checklist
- Use the FWO pay calculator for every employee and keep dated screenshots.
- Document each employee’s award classification in writing at hire and whenever their role changes.
- Re-run pay checks every 1 July after the Annual Wage Review.
- Audit penalty rates on Saturdays, Sundays, public holidays, and late-night shifts — these are where most underpayments occur.
- If you find an underpayment, act on it immediately — back-pay plus interest, and keep a paper trail.
- Prepare for Payday Super from 1 July 2026 — see the ATO Payday Super hub.
A $495,000 mistake is avoidable
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Disclaimer: This is general compliance guidance, not legal advice.
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