The New Code: Navigating Wage Compliance in light of New Criminal Wage Theft Laws

Updated October 2026. First published January 2025.

Since 1 January 2025, intentionally underpaying an employee is a criminal offence. The Voluntary Small Business Wage Compliance Code (the Code) started on the same day.

Many of our clients have asked what the Code does and whether it protects them. Here’s a quick guide.

What is the criminal offence?

The offence applies to INTENTIONAL underpayments. It does NOT apply to honest mistakes.

The maximum penalties are heavy:

• For a company, a fine of the greater of three times the underpayment and $8.25 million.
• For an individual, up to 10 years in prison, a fine of the greater of three times the underpayment and $1.65 million, or both.

Those are the figures from when the offence started. The fines are set in penalty units and the penalty unit increased from $330 to $364 on 1 July 2026. For conduct from that date the maximums work out to $9.1 million for a company and $1.82 million for an individual.

What is the Voluntary Small Business Wage Compliance Code?

The Code is for small business employers. That means employers with fewer than 15 employees.

There is nothing to sign up to and there is no register. You comply with the Code by what you DO.

If the Fair Work Ombudsman is satisfied that a small business complied with the Code, it must not refer the underpayment for criminal prosecution.

How do you comply with the Code?

In short, you comply if you did not intend to underpay. The Ombudsman will look at things like whether you:

• made reasonable efforts to find the correct rates of pay and entitlements for your employees
• sought and relied on advice from a reliable source
• fixed the underpayment once you found out about it.

What does the Code NOT do?

• It does NOT stop civil action. The Ombudsman can still issue a Compliance Notice, accept an Enforceable Undertaking or take you to court. Employees and unions can also take action to recover underpayments.
• It does NOT reduce what you owe. Any underpayment still has to be paid back.
• It does NOT apply to employers with 15 or more employees.

What about larger employers?

The Code does not apply to you, but the principles do. The criminal offence only captures intentional underpayments. The best evidence that an underpayment was not intentional is the work you did to get it right. That means audits, advice, records and fixing errors when you find them.

Employers of any size who find a problem can report it to the Ombudsman and ask for a cooperation agreement. While a cooperation agreement is in place, the Ombudsman cannot refer the conduct it covers for criminal prosecution.

What should employers do now?

• Check which Modern Award or Enterprise Agreement covers each employee, and their classification.
• Check your rates every time they change. Minimum rates change on 1 July each year. See our article on the National Wage Review 2026.
• Keep a record of the advice you get and the checks you do.
• If you find an underpayment, fix it quickly.

If you have any questions or require support complying with the Code or tidying up your pay and leave compliance activities – book in or call us anytime. We’re here to help and this is what we do!

Ross

Legal Practice Director, Drayton’s Law