Tackling Underpayment Risks - Why 2025's Criminal Offence Laws Demand Proactive Solutions

Wage & Salary Underpayment Risks

Wage underpayment remains one of the most significant compliance risks facing Australian employers, with high-profile cases like Woolworths' $50 million penalty and potential $1 billion remediation demonstrating the catastrophic consequences of payroll errors. Since January 2025, intentional underpayments have become criminal offences carrying penalties of up to $8.25 million for companies and 10 years' imprisonment for individuals, while even unintentional mistakes can trigger civil penalties of up to $495,000 per contravention. The complexity of Modern Awards, enterprise agreements, and the NES creates a minefield of classifications, allowances, and penalty rates, where errors are easy to make. At Pay Australia, we provide proactive solutions—comprehensive payroll audits, advanced calculation technology, and expert award interpretation—that identify vulnerabilities before they become crises, transforming compliance from a risk into a competitive advantage while protecting your business, reputation, and workforce.

Underpayment scandals continue to make headlines in Australia, often stemming from errors in administering Modern Awards, enterprise agreements, or the National Employment Standards (NES). High-profile cases, such as the ongoing Woolworths and Coles matters—potentially involving up to $1 billion in remediation—and the $50 million penalty imposed on Woolworths in 2025, underscore the severe consequences of payroll missteps.

The NES provides the minimum safety net, but the layered complexities of awards—covering classifications, allowances, penalty rates, and overtime—frequently lead to inadvertent breaches. Since 1 January 2025, intentional underpayments have become a criminal offence, with companies facing fines of up to $8.25 million (three times the underpayment amount) and individuals risking up to 10 years' imprisonment. Even unintentional errors attract heightened civil penalties, up to $495,000 per contravention for larger employers, escalating significantly for severe cases.

These risks extend beyond finances: back-pay obligations, Fair Work investigations, class actions, and reputational harm can erode employee trust and hinder talent retention.

Pay Australia offers proactive defences against these threats. Our comprehensive payroll audits identify vulnerabilities early, leveraging advanced technology for accurate calculations and real-time monitoring. Backed by deep expertise in award interpretation and legislative updates, we streamline processes to ensure full compliance.

Don't wait for a crisis—protect your business, safeguard your workforce, and turn compliance into a strength. Partner with Pay Australia to eliminate underpayment risks and focus on growth with confidence.

FAQ

Q: What's the difference between intentional and unintentional underpayment, and how are they penalised?

A: Since 1 January 2025, intentional wage underpayments have been elevated to criminal offences under Australian law. Companies found guilty of deliberate underpayment face fines up to $8.25 million (or three times the underpayment amount, whichever is greater), while responsible individuals can face up to 10 years' imprisonment. Unintentional underpayments, while not criminal, still carry severe civil penalties—up to $495,000 per contravention for larger employers, with penalties escalating for repeated or systemic breaches. Beyond these fines, all underpayments require full back-pay to affected employees, plus superannuation and interest, making even "honest mistakes" extremely costly.

Q: How can Pay Australia help my business avoid underpayment risks?

A: Pay Australia takes a proactive, multi-layered approach to eliminating underpayment risks. We conduct comprehensive payroll audits to identify existing vulnerabilities across your workforce, examining award classifications, allowances, penalty rates, and overtime calculations. Our advanced payroll technology ensures accurate, real-time calculations that adapt to complex award requirements and legislative changes. Our team of compliance experts stays up to date on Modern Award updates and Fair Work regulations, providing ongoing monitoring and interpretation support. This combination of technology, expertise, and vigilance catches errors before they become costly scandals, ensuring your payroll is compliant, accurate, and audit-ready.