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The government has announced plans to slug businesses that underpay their workers with much tougher penalties, with “serious” contraventions by big business triggering fines of up to $666,000 or three times the benefit the company got from its underpayment, whichever figure is higher.

Under current rules penalties are either negotiated by the Fair Work Ombudsman with the offending company – equating usually to about 5 per cent the value of the underpayment – or issued by the court with a flat cap that does not factor in how much the company benefited from its law-breaking.

Deliberate and systematic underpayment will also trigger criminal penalties under the government’s plan, with up to four years jail for individuals and $5.5 million in penalties for companies.

The planned changes are part of an industrial overhaul that will be introduced to federal Parliament on Wednesday that will also come with more money for the Fair Work Ombudsman to advise businesses on pay rules to help avert underpayments.

Attorney-General Christian Porter is also expected to ask the Fair Work Commission to simplify pay rules in industries including hospitality and retail to avert future accidental underpayments caused by bosses’ confusion.