Wage theft is criminal now: what builders must know

Yes. Intentionally underpaying an employee is a federal crime in Australia. The offence has applied since 1 January 2025. Builders can face jail, major fines, back pay and civil penalties when payroll shortcuts cross the line.

An honest mistake is not automatically a crime. But it can still mean back pay, interest, penalties and a Fair Work investigation. The big question is whether the underpayment came from intentional conduct.

The federal wage theft offence

The offence sits in the Fair Work Act. It applies when an employer is required to pay an amount to an employee and intentionally engages in conduct that results in the amount not being paid in full, on or before the due date.

The prosecution must prove the criminal case beyond reasonable doubt. That is a higher standard than the one used for civil Fair Work contraventions.

The main figures are:

• As at August 2026, the federal offence has applied since 1 January 2025.
• As at August 2026, an individual can face up to 10 years in prison and a fine based on the greater of 5,000 penalty units or 3 times the underpayment.
• As at August 2026, a company can face a fine based on the greater of 25,000 penalty units or 3 times the underpayment.
• As at August 2026, employee records generally need to be kept for 7 years, and a pay slip must generally be issued within 1 working day of payday.

Penalty units have a dollar value set under Commonwealth law and are indexed. The applicable dollar amount can depend on when the offence occurred. The maximum penalty is not automatic. A court considers the facts and seriousness of the conduct.

A payroll mistake is not the same as deliberate underpayment

Here is the practical difference.

Situation	Likely treatment	What the builder should do
A payroll rule was entered incorrectly and nobody knew	Usually a civil underpayment issue, not automatically a crime	Recalculate, pay the shortfall and fix the rule
A new award rate was missed after an annual update	Usually an error, although repeated failures can increase the risk	Back pay affected workers and improve rate checks
Approved overtime was removed to keep labour costs down	May support an allegation of intentional underpayment	Preserve records and obtain legal advice quickly
Two sets of timesheets were kept, with lower hours sent to payroll	Strong evidence of deliberate conduct may exist	Stop the practice and escalate immediately
A flat rate was used without checking whether it covered overtime and allowances	Can create civil liability, and criminal risk if known shortfalls were ignored	Test every pay period against the governing instrument

Calling something an accident will not settle the question. Investigators can look at emails, site diaries, roster edits, rejected timesheets, payroll overrides and earlier warnings.

A repeated error also does not become criminal merely because it happened more than once. The evidence of intention matters. Even so, repeatedly ignoring known problems is dangerous.

Where construction payroll goes wrong

Building payroll has more moving parts than a standard weekly wage. The applicable rules may come from a modern award, an enterprise agreement, the National Employment Standards or an employment contract. A contract cannot simply remove minimum award or agreement entitlements.

Common risk areas include:

Wrong classifications

A labourer, carpenter, operator, apprentice or leading hand may have a different classification and rate. Duties matter more than the label entered in payroll.

Apprentice rates can also change with the year of apprenticeship, age, training arrangements and the relevant industrial instrument.

Overtime and RDO rules

Site hours do not always match paid ordinary hours. Early starts, late finishes, Saturday work, crib breaks and rostered days off can change the calculation.

Do not assume a flat hourly rate covers everything. The rate and written arrangement need to be checked against each entitlement it is meant to absorb.

Allowances

Depending on the award or enterprise agreement, workers may qualify for industry, tool, meal, travel, fares, height, leading hand or other allowances. Some are paid for each hour. Others apply per day, per occasion or only in particular conditions.

Bad time records

Paper timesheets often pass through several hands. A supervisor may round the hours, remove travel time or change overtime without recording why. Payroll then pays the edited version without seeing the original.

Keep the submitted record, the approval trail and any change. A single unexplained total is hard to defend months later.

Employees treated as subcontractors

An ABN does not automatically make a worker an independent contractor. Control over hours, tools, delegation, financial risk and the working arrangement all matter. Sham contracting can create separate Fair Work exposure, tax debts and super obligations.

For more practical guidance on records, approvals and pay runs, see the payroll operations hub.

What to do when you find an underpayment

First, do not alter or delete anything. Keep rosters, site diaries, time records, payroll exports, contracts, award classifications and approval messages.

Next, work out the correct rule. Confirm the worker’s employment status, industrial instrument, classification and entitlements for each affected pay period. Awards and enterprise agreements can change during the review period.

Then calculate the full shortfall. Include affected overtime, penalties, allowances and leave payments. Check whether tax, super or state long service leave obligations also need correction under their own laws. Not every payroll-related debt is covered by the federal criminal offence, but that does not make the debt optional.

Use the compliance audit tool to check records, classifications and pay items in a consistent order. For a serious or deliberate issue, have the calculations reviewed by an employment lawyer or experienced payroll specialist.

Pay employees promptly once the amount is confirmed. Give them a plain explanation showing the periods, hours, rates and entitlements corrected. Do not ask anyone to sign away minimum rights in return for receiving money already owed.

Small business protections and voluntary disclosure

A small business employer may be protected from criminal referral by the Fair Work Ombudsman if it complies with the Voluntary Small Business Wage Compliance Code.

As at August 2026, a small business employer generally has fewer than 15 employees. Casual employees are counted when they are employed on a regular and systematic basis. Employees of associated entities may also affect the count.

The code is not permission to underpay. A business must take the required steps after discovering a problem. It also does not remove the obligation to pay workers or prevent civil recovery.

Other employers may be able to self-report possible criminal underpayments to the Fair Work Ombudsman and seek a cooperation agreement. Whether that is suitable depends on the facts. Get advice before making admissions or assuming an agreement will be offered.

The sensible site rule

Pay from approved source records, keep every change visible and test payroll against the correct award or enterprise agreement. If someone asks payroll to hide hours, suppress an allowance or use a knowingly false classification, stop and escalate it.

The criminal law is aimed at intentional conduct. Good records and quick corrections help show the difference between a genuine mistake and a deliberate decision not to pay workers properly.