Underpayment occurs when an employee is paid less than their legal entitlement, attracting civil penalties.
Legislation: Fair Work Act 2009 Part 4-1 | Category: Wages & Payment
What is Underpayment?
Underpayment occurs when an employee is paid less than their legal entitlement under the Fair Work Act, awards, enterprise agreements, or employment contracts. Underpayment can involve base wages, overtime, penalty rates, allowances, leave loading, superannuation, or any other monetary entitlement. It is a contravention of the Fair Work Act attracting civil penalties.
Underpayment has been a major focus of regulatory and media attention in recent years, with high-profile cases involving major retailers, hospitality groups, and franchises. Reforms have increased penalties, introduced criminal offences for wage theft, and strengthened enforcement powers.
Key Compliance Points for Employers
- Employees can claim underpayments going back 6 years (previously unlimited in some jurisdictions)
- Maximum penalties per contravention: $93,900 for companies, $18,780 for individuals (2024 rates)
- Serious contraventions (deliberate or reckless) attract 10x penalties
- From January 2025, intentional wage theft is a criminal offence
- Proactive self-auditing and voluntary disclosure can be mitigating factors
Frequently Asked Questions
What is Underpayment?
Underpayment occurs when an employee is paid less than their legal entitlement, attracting civil penalties.
Why is Underpayment important for employers?
Understanding underpayment helps employers comply with Australian employment law, avoid penalties, and maintain fair workplace practices.
