Avoiding underpayment claims in labour hire: where they start, and the checks that catch them

Short version: Most underpayments in casual and labour hire payroll come from ordinary errors — the wrong award or classification, a missed penalty rate or allowance, overtime paid as ordinary time, or hours that don’t match what was worked. An honest mistake is still an underpayment: it must be back-paid, and it can lead to civil penalties. Since 1 January 2025, intentionally underpaying an employee can also be a criminal offence, but the Fair Work Ombudsman is clear that honest mistakes are not included. In labour hire, the labour hire business is the employer and is responsible for its employees’ pay, and a host can also be liable if it is involved in an underpayment. Accurate records and regular checks are what catch errors before they grow.

A mistake, a contravention and a crime are different things

“Wage theft” is often used loosely for any underpayment. The law draws sharper lines.

An honest mistake

If you find you have underpaid someone, the Fair Work Ombudsman’s guidance is to fix it quickly: work out the difference between what should have been paid and what was paid, talk to the employee and show them your calculations, pay the amount as soon as possible (by instalments if you agree that with the employee), record the back payment in their pay records, check any extra tax and super that is due, and fix the cause so it doesn’t happen again.

A civil contravention

Not paying award, agreement or National Employment Standards entitlements — or not keeping proper records and pay slips — can breach civil remedy provisions of the Fair Work Act, even with no intention to underpay. The Fair Work Ombudsman can issue a compliance notice requiring an employer to calculate and pay what is owed, accept an enforceable undertaking, or take the matter to court. Maximum civil penalties were increased in 2024 and 2025, mainly for businesses with 15 or more employees; for those businesses, the maximum for an underpayment can be three times the amount underpaid, where that is higher than the standard maximum.

The criminal offence

Since 1 January 2025, section 327A of the Fair Work Act makes it an offence for an employer to intentionally engage in conduct that results in a failure to pay an amount it is required to pay to, on behalf of or for the benefit of an employee under the Act or a fair work instrument such as an award or enterprise agreement. The Fair Work Ombudsman puts it simply: the employer must have intentionally done something that intentionally resulted in the amount not being paid when due, and this doesn’t include honest mistakes.

• Who: an employer can be an individual or a company, and other people or businesses can be prosecuted for their part, such as aiding an employer to commit the offence.
• Who prosecutes: only the Commonwealth Director of Public Prosecutions or the Australian Federal Police, within 6 years of the offence. The Fair Work Ombudsman investigates and can refer matters.
• Maximum penalties: up to 10 years’ imprisonment for an individual, and fines of up to three times the underpayment or a fixed maximum, whichever is higher. The Fair Work Ombudsman publishes the current dollar figures.
• Cooperation agreements: an employer that voluntarily tells the Fair Work Ombudsman about conduct that could be the offence can ask for a cooperation agreement, which stops the Ombudsman referring that conduct for prosecution. Civil action can still follow.
• Small business: if the Fair Work Ombudsman is satisfied that a small business employer (fewer than 15 employees) complied with the Voluntary Small Business Wage Compliance Code — in short, that the underpayment wasn’t intentional — it can’t refer the employer for prosecution. Civil action can still follow.

Who is responsible in a labour hire arrangement

• The labour hire business is the employer. The Fair Work Ombudsman says labour hire employers hire their employees and are responsible for their pay and entitlements, even though the work is done for a host.
• Protected pay rates. Where the Fair Work Commission has made a regulated labour hire arrangement order, labour hire employees working for that host must be paid no less than the rate they would get under the host’s enterprise agreement or other relevant instrument. Check whether an order covers any host you supply.
• Hosts can be liable too. Under section 550 of the Fair Work Act, a person involved in a contravention — for example, by being knowingly concerned in it — is treated as having contravened it. The Fair Work Ombudsman gives the example of a host paying a contract price it suspects is too low to cover overtime and penalty rates and doing nothing about it.

Where underpayments usually start

• The wrong award, agreement or classification. Every rate flows from these, so a worker classified too low is underpaid on every shift. Check again when their duties change.
• Penalty rates, overtime and allowances missed. These depend on when, where and how each shift was worked, so a flat hourly rate can quietly fall short on weekends, nights, long shifts or particular kinds of work.
• Casual loading not paid or not shown. Where the award requires a casual loading, it has to be paid, and pay slips must show loadings that can be separated out from the hourly rate — or note that the rate includes them.
• Hours that don’t match the work. Rounded, estimated or unapproved hours feed straight into the calculation, so a correct rate applied to the wrong hours is still wrong.
• Rates not updated. Minimum rates usually change from the first full pay period on or after 1 July, and some workers move up with age or progression.
• Super paid late or on the wrong base. Super is now due each payday (see below).
• Gaps in records and pay slips, which make every other error harder to find and harder to disprove.

The records the Fair Work rules require

Employers must keep time and wages records for 7 years. They must be legible, in English, readily accessible to a Fair Work Inspector, not false or misleading, and changed only to correct an error. They include:

• Employee details — names, the employer’s ABN, commencement date, whether the employee is full-time or part-time, and whether they are permanent, temporary or casual.
• Pay — the rate paid, gross and net amounts, deductions, and any loadings, penalty rates, allowances or bonuses paid.
• Hours — overtime hours with their start and finish times, and the hours worked by casual or irregular part-time employees who are paid by time worked.
• Leave, super contributions and termination details.

Pay slips must be given within 1 working day of payday. If records aren’t kept, an inspector can issue an infringement notice, and an employer that hasn’t kept or produced the required records may have to prove to a court that it didn’t underpay.

Super under Payday Super

Under Payday Super, which started on 1 July 2026, the super guarantee is 12% of each employee’s qualifying earnings, paid for each payday and received by the fund within 7 business days — longer in some cases, such as 20 business days for the first contribution for a new employee. Super that isn’t paid in full, on time and to the right fund attracts the super guarantee charge. The ATO lists casual loading and shift penalties as qualifying earnings, while overtime is not where ordinary hours are clearly identified. When you back-pay wages, check whether super is due on the back payment too. More in Payday Super for labour hire agencies.

Checks that catch underpayments early

1. Confirm the award or agreement and the classification when a worker starts, and again when their duties change.
2. Check whether any host you supply is covered by a regulated labour hire arrangement order.
3. Each pay run, reconcile the hours paid against the hours approved, and sample a few pay slips against the award.
4. Look closely at weekend, night, public holiday and long shifts, where penalty, overtime and loading rules apply.
5. Recheck rates when they change each July and when workers’ age or progression changes their rate.
6. Check that super is reaching funds within the Payday Super deadline.
7. When you find an error, fix it using the Fair Work Ombudsman’s steps and keep the evidence of what you did.

Where OnCrew fits, and where it does not

OnCrew does not interpret awards. It doesn’t decide which award or agreement applies, classify workers, calculate pay rates, casual loading, penalty rates, overtime or allowances, decide PAYG withholding, or run payroll. It can’t prevent underpayments or make your payroll compliant — that depends on your payroll system, your process and the people who check it.

What OnCrew does record is part of the evidence a pay run starts from:

• Shifts and actual times. Each clock-in is location-checked against the site, and one outside the boundary is flagged for review rather than blocked; clock-out is time-stamped but not location-checked.
• Approval. A timesheet’s approval is stamped with who approved it and when, and only approved timesheets go into the payroll export.
• The export. The Employment Hero-format file carries each shift’s worker, date, start and finish times, break, hours, client and a work-type label for sleepovers, on-call and broken shifts. It carries no pay rates, and it doesn’t separate ordinary time from overtime — your payroll system does that. Hours are clock-in to clock-out less the unpaid break you configure, unless a site is set to pay the rostered shift; agencies on weekly timesheets have workers enter their own hours.
• An activity log of specific events, such as timesheet approvals, rejections and amendments, and payroll exports. It is not a record of every action.

That makes OnCrew useful for one of the checks above — comparing the hours you paid with the hours that were approved, shift by shift. It is not a complete set of Fair Work records: pay rates, gross and net pay, deductions, leave and super records live in your payroll system. For how the employee and contractor question fits in, see sham contracting vs genuine casual employment.

Official sources checked for this guide (October 2026): Fair Work Act 2009 (compilation of 7 July 2026), ss 327A–327C, 550 · Fair Work Ombudsman — criminal prosecution · Fair Work Ombudsman — criminalising wage underpayments · Fair Work Ombudsman — cooperation agreements · Fair Work Ombudsman — Voluntary Small Business Wage Compliance Code · Fair Work Ombudsman — I think I’ve underpaid my employee · Fair Work Ombudsman — labour hire and supply chains · Fair Work Ombudsman — record-keeping · Fair Work Ombudsman — pay slips · Fair Work Ombudsman — minimum wages · ATO — how to work out and pay super · ATO — payment deadlines for Payday Super · ATO — what payments are qualifying earnings