The Fair Work Ombudsman audited 489 businesses in Albury-Wodonga, Ballarat in Victoria and Wollongong and found almost half of them failed to comply with workplace laws.
The findings highlighted young workers were particularly vulnerable to receiving below minimum wages and conditions, Fair Work Ombudsman Sandra Parker said.
"Like many workers in the hospitality industry, young workers in these regions were potentially vulnerable due to their age, visa status and reliance on local jobs to support themselves," she said.
The Ombudsman recovered $331,386 in wages for 725 underpaid workers in takeaway food outlets, cafes and restaurants, retail businesses, pubs and bars.
More than half of the money recovered came from hospitality businesses in the two states, according to the watchdog.
"Australia's minimum pay rates are not negotiable, and employers in the fast food, restaurant and cafe sector need to actively check that they are paying their staff correctly before we visit their business," Ms Parker said.
Underpaying staff with less than the minimum hourly wage or incorrect penalty rates was the most common breach.
Businesses also failed to provide staff with proper pay slips and failed to comply with record-keeping requirements.
The watchdog issued 35 formal cautions, 37 on the spot fines and nine compliance notices.
Back payments recovered ranged from $7.26 up to $40,434.69.