Since January 1, 2025, intentionally underpaying hospitality staff is a criminal offense carrying up to 10 years imprisonment — hospitality is one of the Fair Work Ombudsman's named priority enforcement sectors.
Wage Theft Changed From a Civil Matter to a Crime
From January 1, 2025, new Part 3A-1 of the Fair Work Act 2009 — introduced by the Fair Work Legislation Amendment (Closing Loopholes No. 2) Act 2024 — made intentional underpayment of an employee's wages or entitlements a criminal offense for the first time in Australian workplace law. Before this date, underpaying staff was overwhelmingly a civil matter: a back-pay order and a fine. Under the new section 327A, a person who intentionally engages in conduct resulting in a failure to pay an employee an amount they were owed for work performed can now face criminal prosecution. Penalties for individuals reach up to 10 years' imprisonment and fines up to $1,565,000; body corporates face fines up to $7,825,000. This does not cover honest payroll mistakes — the offense requires intentional conduct — but the Fair Work Ombudsman has explicitly named hospitality as a priority enforcement sector, alongside fast food, retail, horticulture, and cleaning.
What Counts as an "Entitlement" Under the New Offense
The criminal offense covers a broad range of payments: base wages, superannuation contributions, redundancy pay, leave payments, overtime, penalty rates, allowances, and leave loading. It does not extend to purely contractual entitlements like discretionary bonuses. Employers can self-report suspected wage theft to the Fair Work Ombudsman under a cooperation agreement, which may avoid criminal referral — but this does not eliminate exposure to civil penalties or repayment obligations to affected staff.
Where Restaurants Get Tripped Up: Award Interpretation
Most hospitality wage theft doesn't start as deliberate fraud — it starts with a misunderstanding of how the Restaurant Industry Award or Hospitality Industry (General) Award actually calculates pay. Common failure points include: paying a flat hourly rate that doesn't account for weekend penalty rates or public holiday loadings; treating a salaried arrangement as covering all hours worked without confirming it meets the "better off overall" test against the award; and miscounting hours for casual staff working irregular shifts. Once a pattern of underpayment continues after a business becomes aware of it — even if it started as an honest error — the "intentional" threshold for the criminal offense can become much easier to meet.
Building a Defensible Payroll System
- Confirm which award applies to each role and whether any salaried arrangement genuinely satisfies the better-off-overall test against the award's minimum entitlements, penalty rates included.
- Keep a digital, timestamped record of every shift worked — start time, finish time, and breaks — rather than relying on rostered hours as a proxy for actual hours worked.
- Audit payroll against the current award rates at least quarterly, since award rates change and a system that was compliant a year ago may not be now.
- If you discover a past underpayment, act on it immediately and transparently rather than treating it as a one-off to quietly absorb — continuing a known underpayment is exactly the pattern the new criminal offense targets.
- Consider the Voluntary Small Business Wage Compliance Code if eligible, which can provide protection from criminal prosecution for genuine errors that are corrected.
Related Kibbo Tools
Sources
- Fair Work Ombudsman — New criminal underpayment laws start 1 January 2025. fairwork.gov.au
- Fair Work Ombudsman — Criminalising wage underpayments and other issues. fairwork.gov.au