Payroll Compliance in Australia

Payroll compliance has become an important topic for employers in recent times, especially in Australia. If you’ve kept up with recent media publications, you would have seen many large businesses continuing to underpay employees.

Are these businesses all intentionally doing this to increase their profit?

The answer is invariably – No. The truth is that our Australian payroll rules and regulations can be complex and tricky to manage. Furthermore, the surveillance by the FWO around these types of payroll errors has been ramped up once it became apparent that many employees were being underpaid.

National Employment Standards

The National Employment Standards (NES) are the minimum entitlements that cover all employees, regardless of which award, agreement or contract an employee is covered by. The NES is made up of 11 major entitlements, many of which relate to types of leave, maximum weekly working hours and other similar entitlements.

Underpaying employees can also be a violation of the NES which can land employers in quite a lot of trouble. The penalties for not giving employees one – or multiple – of their minimum entitlements can be quite severe, especially if the employee is considered to be a ‘vulnerable worker’.

Awards and Agreements

Most employers use Awards or Enterprise Agreements to understand how much they should pay their employees, entitlements to breaks and allowances, when to apply overtime or other loadings, and other employment conditions. Underpayments can occur when employers mistake an employee’s Award classification and base rate of pay. Another common cause for employers to underpay is the failure to give employees every entitlement that they’re obligated to, under the applicable Award or Agreement.

Modern Awards will set the minimum wage rates for employees performing specific roles in different industries. Awards cover other entitlements such as:

  • Hours of work
  • Rosters
  • Breaks
  • Allowances
  • Penalty rates
  • Overtime

Awards cover everyone, apart from those covered by agreements or in uncommon circumstances, employees can be Award- or Agreement-‘free’ where they are not covered by either. In this case, the employee will still be covered by the National Minimum Wage and the NES. Additionally, employees on high salaries and in senior roles may not fall under any award, even if one applies to other workers for the industry they work in.

Enterprise agreements generally apply to one or a group of businesses and were often created to simplify business operations and give certainty towards pay increases, amongst other reasons. The other main reason is because a union or unions demanded higher wages and better conditions than under the award, perhaps with the threat of industrial action. Employees will need to be Better-Off-Overall under the Enterprise Agreement compared to the Award, to get the agreement approved to begin with.

Fair Work Ombudsmen

The Fair Work Ombudsmen (FWO), amongst other duties such as educating and assisting employees and employers, acts as the key organisation in monitoring compliance with Australia’s workplace laws, as well as enquiring into and investigating potential breaches of the Fair Work Act.

The FWO has significantly ramped up its efforts in the detection and enforcement of underpayments and payroll non-compliance in recent times. In the 2020-21 financial year, the FWO used 62% more enforcement tools than the previous year, uncovering a record $148 million in unpaid wages.

Why is WageSafe the Best Australian Payroll Solution?

WageSafe is unrivaled in its ability to connect into a business’s payroll, time and attendance, and any other relevant systems, to perform real-time, continuous payroll audits.

Whether you have an award or agreement, WageSafe can give you an extra layer of assurance that you are paying your employees correctly.

If payroll compliance is an important part of your business, make sure to sign up to the WageSafe Newsletter, where we bring you monthly updates of the latest happenings in the payroll compliance world and other useful resources for you and your business.

Feb 28, 2022

Share this entry


  • In a recent development, Baker’s Delight, a well-known bakery franchise, is facing legal action initiated by the workplace watchdog for its alleged failure to prevent a franchisee from underpaying workers. The Fair Work Ombudsman has filed a case in the Federal Court, accusing Baker’s Delight of being aware of the franchisee’s underpayments but failing to […]

  • The Financial Review highlights the key issue of underpayments in a large retailer. Chemist Warehouse is facing a $10 million backpay bill after the Shop Distributive and Allied Employees Association (SDA) took legal action against four of its South Australian franchisees for allegedly underpaying nine staff while working higher duties. The union identifies that the […]