Respond to an allegation of underpayment of wages

We will help you assess an underpayment allegation and resolve the matter in a way that limits your financial and reputational exposure.

An underpayment claim from a current or former employee can arrive as a direct allegation, a Fair Work Ombudsman inquiry, or a complaint to the Commission, and the response you give in the first days will significantly affect your exposure.

Some underpayment allegations are well-founded, some are overstated, and some rest on a misreading of the applicable award or enterprise agreement. Before you respond in any substantive way, you need to know which situation you are in. We assess the claim against the applicable award, contract, and pay records, advise on your actual liability, and help you resolve the matter at the lowest cost.

What are an employer's obligations when an underpayment allegation is made?

An underpayment claim arises when an employee or former employee alleges they were not paid their full legal entitlements during the employment relationship. Legal entitlements may derive from the applicable modern award or enterprise agreement, the National Employment Standards under the Fair Work Act 2009 (Cth), or the employment contract. The Fair Work Ombudsman has authority to investigate underpayment complaints and to take enforcement action, including issuing compliance notices and commencing court proceedings, where an employer fails to cooperate or remedy a genuine underpayment. Recent amendments to the Fair Work Act 2009 (Cth) introduced criminal liability for deliberate wage theft, significantly raising the stakes for employers who are aware of an underpayment and choose not to address it. Employees generally have six years to bring a claim for underpaid entitlements, meaning the potential back payment period is substantial.

How do I know if the underpayment claim against me is valid?

Whether an underpayment claim is valid depends on whether the employee was paid at least their minimum entitlements under the applicable modern award, enterprise agreement, National Employment Standards under the Fair Work Act 2009 (Cth), and their contract. This requires a careful review of the relevant pay rates, allowances, and penalty rates over the period in question, cross-referenced against actual pay records. Many claims are genuine but smaller than the employee alleges, while others rest on an incorrect reading of the award. We review the claim against the records and advise on your actual exposure.

What happens if I do not respond to an underpayment complaint?

An employer who does not respond to an underpayment complaint risks the Fair Work Ombudsman escalating the matter from a complaint to a formal investigation. If the investigation finds an underpayment and the employer fails to remedy it, the Ombudsman may issue a compliance notice, seek enforceable undertakings, or commence court proceedings that can result in significant penalties in addition to a back payment order. Under the Fair Work Act 2009 (Cth), employers are required to cooperate with Ombudsman investigations, and failure to do so attracts its own consequences.

Can I face criminal liability for underpaying an employee?

Following amendments introduced by the Closing Loopholes legislation to the Fair Work Act 2009 (Cth), deliberate underpayment of wages is now a criminal offence in Australia, with significant penalties for individuals and corporations found to have intentionally engaged in wage theft. Criminal liability requires deliberate intent rather than inadvertent non-compliance, but the framework raises the stakes for employers who become aware of an underpayment and choose not to address it. We advise on the distinction between inadvertent underpayment and conduct that may attract criminal liability, and on the steps to take to address a genuine underpayment before it escalates.

How far back can an underpayment claim go?

Under the Fair Work Act 2009 (Cth), employees generally have six years to bring a claim for underpaid entitlements, meaning an underpayment claim can reach back over a substantial period and result in a back payment that is significantly larger than the amount underpaid in any single pay cycle. We advise on the period over which the claim extends, calculate the actual exposure based on the records, and advise on the most appropriate way to resolve the matter. Prompt action to address a genuine underpayment limits both the total liability and the risk of further regulatory action.

The claim assessed against actual records before you respond.

Fair Work Ombudsman engagement managed to demonstrate good faith.

Resolution achieved with minimum financial and reputational damage.

An underpayment claim that is not responded to correctly can cost far more than the underpayment itself.

The financial exposure from an underpayment claim depends partly on the amount underpaid and partly on how the employer responds. An employer who investigates, cooperates, and remedies a genuine underpayment promptly is in a much stronger position than one who does not. Getting advice before you respond is the most effective step you can take.

An underpayment allegation is not always what the employee says it is. But you need to know that before you respond.

An employee or former employee has alleged that you underpaid them, and you are not sure whether the claim is well-founded, overstated, or based on a misreading of the applicable award or agreement. Responding without knowing your actual position risks either admitting liability you do not have or failing to remedy a genuine underpayment in a way that triggers a regulator investigation. The right response starts with understanding what the records actually show.

We will review the claim against the applicable award, enterprise agreement, and employment contract and advise on whether the allegation is well-founded and to what extent.
We will calculate your actual financial exposure based on a review of the pay records and the applicable entitlements over the relevant period.
We will advise on the most appropriate response to the employee and to any regulator involvement.
We will assist in negotiating a resolution and documenting any settlement to minimise ongoing exposure.

A former employee has said you underpaid them, and you know that how you respond in the next few days will matter.

A current or former employee has made an allegation that they were not paid correctly during their employment. The claim may relate to award rates, penalty rates, allowances, or another entitlement you are uncertain about. You may have already received contact from the Fair Work Ombudsman, or the claim may have come directly from the employee or their representative. Before you respond in any substantive way, you need to understand what the records show and whether the allegation is sound.

What's included in your underpayment claim response service

Award and entitlement review against the claim.
Pay records assessment and actual liability calculation.
Fair Work Ombudsman engagement and response management.
Resolution strategy and negotiation assistance.
Settlement documentation and ongoing compliance advice.

What happens when employers respond to underpayment claims without understanding their actual position?

Employers who respond to underpayment claims without first assessing their actual position regularly make one of two errors. The first is admitting liability on a claim that was overstated or based on an incorrect reading of the applicable award, creating a financial obligation that should not have been accepted. The second is denying liability on a claim that was well-founded, prompting the employee to escalate to the Fair Work Ombudsman and triggering a formal investigation that examines not just the current claim but the employer’s pay practices over the preceding six years. Where the investigation reveals a systemic underpayment, the back payment liability can dwarf what a prompt resolution of the original claim would have cost, and the employer may also face penalties for non-compliance with the applicable award.

Here is how we help you respond to an underpayment claim and limit your exposure.

We review the claim against the applicable award, enterprise agreement, and employment contract, and assess the pay records for the relevant period to determine what the actual underpayment liability is, if any. We advise on whether the claim is well-founded, whether it is overstated, and what the correct entitlement calculation is. We then advise on the most appropriate response to the employee and any regulator involvement, with the goal of resolving the matter at the lowest cost and with minimum reputational damage. Employers who respond promptly and in good faith, with a clear understanding of their actual position, consistently achieve better outcomes than those who react without advice.

Three steps to responding to an underpayment claim and limiting your exposure.

Claim assessed, liability calculated, resolution managed.

Assess the claim.

We review the claim against the applicable award and pay records and advise on whether the allegation is well-founded and what the actual financial exposure is.

Respond correctly.

We advise on the appropriate response to the employee and any regulator, and prepare a response that demonstrates good faith without admitting liability that is not established.

Resolve and remediate.

We assist in negotiating a resolution, documenting any settlement, and advising on changes to pay practices that will prevent the same issue arising again.

Employment lawyers experienced in underpayment claims, Fair Work Ombudsman investigations, and modern award compliance across all industries.

We have seen how quickly a straightforward underpayment allegation can become an expensive and distracting investigation when the employer’s initial response creates more problems than the original claim. No one likes to feel that they are being taken advantage of, particularly when you believe your pay practices are reasonable, and our employment lawyers understand that frustration. We have advised employers across a wide range of industries on underpayment claims, from single-employee allegations through to systemic underpayment investigations involving multiple awards and large workforces. We know how to assess claims accurately, engage with regulators constructively, and resolve matters efficiently.

We understand you want to know the cost, before we get started.

We will map out our process, from beginning to end, so you know what the journey will look like before you get started.

We will provide you with a clear and detailed Work Proposal covering each step along the way.

Our fair fees are all-inclusive. No hidden costs for telephone calls, emails, photocopying, couriers, or coffee.

Our great lawyer guarantee

We want to be part of your team over the long term. We achieve this by adhering to these core principles:

Take the time

We listen carefully to understand what you want to achieve. Then we thoroughly explain our advice and step you through the documents. You can be sure you know the full consequences.

Share our knowledge

We will pass on as much knowledge as we can, so you can make your own informed decisions. We want to make you truly independent.

Stick to our knitting

We only do what we're good at. You can be confident that we know what we're doing and don't pass on the cost of our learning.

Work as one team

Someone will always be available to answer your questions, or point you in the right direction. You will also benefit from a range of perspectives and experience.

Fair pricing

For advice and documents, we provide a fixed or capped quote so you don't take price risk. If you're in a dispute, we map out the process and costs so you know what to expect.

It's your show

We're not in this for our egos. We're in it for a front row seat to witness your success.

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