Since 1 January 2025, intentionally underpaying an employee's wages or entitlements is a criminal offence under the Fair Work Act. Not a civil penalty, not a back-pay order with interest - a crime, carrying potential imprisonment for individuals and substantial fines for companies.
For most small employers, the first reaction is fear in the wrong place. The offence requires intention: it targets employers who knew they were underpaying and did it anyway. An honest mistake - a misclassification, a missed allowance, an outdated rate - is not a crime. But honest mistakes were expensive before this reform and remain expensive after it: back-pay, civil penalties, and the cost of the dispute itself.
What the reform really changed for small business is the value of being able to prove the mistake was honest. That is what the Code is for.
The safe harbour: the Voluntary Small Business Wage Compliance Code
Alongside the criminal offence, the government declared a Voluntary Small Business Wage Compliance Code. In practical terms: a small business employer who complies with the Code cannot be referred for criminal prosecution over an underpayment. The Ombudsman looks at whether the employer made a genuine, documented effort to pay correctly.
The conduct the Code describes is not exotic. It is the ordinary discipline of wage compliance:
checking the correct award coverage and classification for each employee - on duties, not job titles;
paying rates that meet or exceed the current instrument, and updating them when rates change;
keeping proper records of hours, pay and entitlements;
acting promptly to fix errors when they are found, including back-payment;
seeking advice from a reliable source when unsure - and keeping evidence of having done so.
Notice the pattern: every item is something you either can or cannot produce a document for. "We were careful" is a feeling. A dated classification determination, a rate verification against the current award, and a record of advice sought are evidence.
Where WA employers trip
Two WA-specific wrinkles make this harder here than in the eastern states. First, the criminal offence and the Code live in the national system - so the threshold question is whether you are a national system employer at all. WA's unincorporated businesses sit in the state system, where the state's own compliance framework applies instead. Most WA employers do not know which system they are in with certainty; that is the first thing to verify. Second, WA's construction and trades sector - a large share of the state's small employers - is unusually award-dense, with classification structures where the intuitive answer is frequently the wrong one.
The employers who end up in serious trouble are rarely the ones who made a mistake. They are the ones who cannot show they ever checked.
What to actually do
Verify your system coverage - national or WA state. Everything downstream depends on it.
Commission a wage audit you control. Classification review, rate verification, exposure assessment - documented, dated, filed.
Fix what it finds, promptly. Voluntary rectification is the cheapest form of remediation that exists.
Repeat annually. Award rates change every July. A compliance position is only current until the next wage review.
LEGISLATIVE BASIS
Criminal underpayment offence: Fair Work Act 2009 (Cth) as amended by the Fair Work Legislation Amendment (Closing Loopholes) Act 2023 (Cth), in force from 1 January 2025. Safe harbour: Voluntary Small Business Wage Compliance Code, declared under the Fair Work Act. This piece is general information, not legal advice. Basis current at the July 2026 review date.
The productised version
WPG's WA Wage Compliance Audit is exactly the documented, proactive check described above: classification determinations for every role, rate verification against the current instruments, back-pay exposure quantified, and a dated evidence pack for your files. Fixed price by headcount band.