What the offence is
Section 327A of the Fair Work Act 2009 makes it a criminal offence for an employer to engage in conduct that intentionally results in an employee being underpaid an amount they are owed under the Act or a fair work instrument, for conduct from 1 January 2025 (Fair Work Act 2009 (Cth), Federal Register of Legislation). The key word is intentionally. The provision targets employers who knew what was owed and chose not to pay it, not employers who misread an award.
What it is not
An honest misclassification, a missed allowance or a rate that was not updated at 1 July is still a civil underpayment: it must be back-paid with superannuation and interest, and civil penalties can apply, but it is not the criminal offence. The danger is the transition from one to the other: an employer who learns of an underpayment and leaves it uncorrected is harder to describe as making an honest mistake the following quarter.
Why award drift is the usual route in
| Where it starts | What it looks like | What catches it |
|---|---|---|
| 1 July rate change not applied | Every award-covered employee underpaid from the first July pay | Re-basing rates each annual wage review; the 2026 review added 4.75% (Fair Work Commission, Annual Wage Reviews) |
| Wrong classification | A level 3 paid as a level 2 for years | Classification on duties and qualification, reviewed at each change of role |
| Penalties and allowances missed | Weekend, public holiday, split shift, tool and travel allowances | Award interpretation on every pay run, not at onboarding only |
| Super not paid on time | Super guarantee shortfalls, now visible every pay under Payday Super (ATO, Payday Super for employers) | Super funded on payday |
What to do if you find an underpayment
Quantify it fully, including superannuation and interest, back-pay it, tell the employees affected what happened and what you have paid, and record how the error arose and what changed so it cannot recur. The Fair Work Ombudsman treats a self-identified, corrected underpayment very differently from one it finds. If the amount is material or spans years, get advice before you communicate.
Where this sits in a connected back office
The offence is about intent, but the exposure is about systems. A payroll that is checked against the current award on every run, by people who also do the HR classification, is the practical protection: Valont publishes guides to all 122 modern awards (Valont award guides) and runs that check as part of award compliance.
If this is the problem you are working on, Valont’s People hub runs award compliance and hr & ir advisory as part of a connected back office, and the award finder shows where to start.
About the author
Nick Lucock
Chief Executive Officer, Valont
Nick Lucock is the Chief Executive Officer of Valont and leads its day-to-day operations across Finance, People, Operations and Growth. He runs the team that does the work Valont publishes about: the bookkeeping, BAS and payroll runs, the award interpretation on every pay cycle, the IT and security layer, and the advisor cadence that keeps an owner's back office current. Nick writes the practical side of Valont's library, the processes, systems and tools that keep Australian SMEs compliant and growing, and he is the author of most of the operational articles on the site. He works with owners across construction and trades, health, hospitality and professional services.
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