Award Compliance Under the Spotlight
While most employers do not deliberately underpay staff, the new wage theft laws create an even stronger expectation that businesses ensure their employees are paid correctly. Employers should be able to show that their award classifications, payroll systems and wage‑checking processes are accurate and up to date. Now is the time to review your team’s pay rates and confirm you are meeting all of your obligations.
The Legislative Framework
Under the Fair Work Act 2009 (Cth), employers must pay employees in line with:
- The National Employment Standards (NES)
- The correct modern award or enterprise agreement
- Contractual entitlements
- Superannuation obligations, including the transition to Payday Super from 1 July 2026.
From 1 January 2025, intentional wage underpayment became a criminal offence. These new rules sit alongside the Fair Work Ombudsman’s (FWO) existing powers to investigate suspected underpayments and, when needed, push matters toward prosecution.
While honest mistakes aren’t criminal, the FWO continues to find that incorrect award interpretation is the biggest cause of ongoing underpayments. Employers need to be able to show that any errors were accidental, picked up quickly and fixed without delay.
Award Compliance: The Most Common Risk Area
Most underpayments are not intentional, but are a result of the complexity of Modern awards including:
- Classification streams and levels
- Ordinary hours and roster conditions
- Penalty rates and overtime provisions
- Allowances and minimum engagement periods
- Break requirements
- Annual wage updates and transitional rules
Even small issues – such as a misclassification or misapplied penalty – can compound across pay cycles, employees and locations.
Importantly, payroll systems do not interpret awards; they only apply the configuration set within them. If the setup is incorrect, the payroll outcomes will be incorrect.
Steps Employers Should Be Taking in 2026
These laws are already in effect, and regulators expect employers to have appropriate controls in place. Employers should consider taking the following steps:
1. Confirm Award Coverage and Classifications
Check the correct award(s) apply and ensure each employee’s classification reflects their duties, qualifications and responsibilities.
2. Audit Pay Rates and Payroll Configuration
Verify that:
- Base rates reflect current award rates
- Penalties, loadings and allowances are correctly coded
- Overtime triggers align with the award
- Junior, apprentice and trainee rates are accurate
3. Review Rostering Practices
Ensure ordinary hours, breaks, rest periods, minimum engagements and changes to schedules comply with award rules.
4. Strengthen Record Keeping
Maintain thorough records of time worked, wage calculations, classification decisions and payroll checks. This is critical in the event of an FWO inquiry.
5. Train Managers and Payroll Teams
Managers influence their teams’ hours and breaks whereas payroll teams manage interpretation and configuration. Both groups must understand key award provisions.
6. Rectify Underpayments Quickly
The FWO takes a more favourable view of employers who proactively identify, report and resolve underpayments.
7. Implement Regular Wage Compliance Reviews
Annual or biannual audits help identify emerging risks, particularly as awards, rates and roles change over time.
How Allan Hall HR Can Help
We support employers to strengthen wage compliance through:
- Award interpretation and classification reviews
- Wage compliance and payroll audits
- Payroll configuration support
- Underpayment investigations and remediation planning
- Reviews of rostering, timekeeping and record keeping practices
We are also proud to partner with Employment Hero to help employers streamline payroll, automate award interpretation and improve compliance visibility. Contact Allan Hall HR today to discuss HR software and payroll software solutions to increase compliance and save on HR admin time.
Our goal is to help you build a fair, compliant and defensible wage framework aligned with current regulatory expectations.
Need Assistance?
If you would like support reviewing your wage compliance or ensuring your payroll systems align with current award obligations, contact the Allan Hall HR team here or call us on 1300 916 764.
HR Support Centre Demo
We invite all our clients to explore our complimentary HR Support Centre, designed to help you navigate your employee obligations and stay updated on legislative changes. This valuable resource offers ready-to-use HR templates, best practice guidance, checklists, and access to a vast library of articles on compliance and employee management. Book in a free demo today.