The Federal Government has for the first time terminated a company's contract to recruit overseas workers on 457 visas under a labour agreement.

Immigration Minister Chris Bowen says the Victorian company has breached its contract and underpaid the employees.

Unions have accused some employers of using the visa scheme to cut pay and conditions.

Mr Bowen says the Immigration Department has increased its investigations into the scheme, and his decision sends a strong message to companies that they must abide by the law.