Most underpayments aren't deliberate. A worker is put on the wrong classification level, a casual loading is applied to the wrong base, Sunday rates are entered as Saturday rates, an allowance is missed, or a salary stops covering the hours as the business gets busier. Each mistake looks small on one payslip. Over three years and twenty staff, it becomes a real number, with super, interest and penalties on top.
We check pay because we run payroll for many of our clients and see where things go wrong. Here's what an award compliance check involves, what it costs to ignore, and where an accountant's role ends and an employment lawyer's begins.
Why does award compliance matter more now?
Three changes have raised the stakes for employers:
- Wage underpayment can be a crime. Since 1 January 2025, intentionally underpaying an employee's wages or entitlements is a criminal offence under the Fair Work Act, with possible imprisonment for individuals and large fines for companies. Honest mistakes aren't caught by the criminal offence, but they still carry civil penalties and back pay. Small businesses that comply with the Voluntary Small Business Wage Compliance Code are generally not referred for criminal prosecution over an underpayment, though back pay and civil penalties can still apply.
- Rates moved again on 1 July 2026. The national minimum wage rose to $26.44 per hour ($1,004.90 for a 38-hour week), and modern award minimum rates rose by 4.75%, from the first full pay period starting on or after 1 July 2026. If your payroll wasn't updated, every pay since then is short.
- Payday Super started on 1 July 2026. Super now has to be paid with each payday and reach the employee's fund within 7 business days. Back pay attracts super on the day it's paid.
Key point: The best evidence that an underpayment was an honest mistake is that you went looking for it, found it, and fixed it promptly. A regular compliance check is that evidence.
What does an award compliance check look at?
| Area | What we test | Common errors |
|---|---|---|
| Award coverage | Which modern award (or enterprise agreement) covers each employee | Wrong award, or assuming office staff are "award free" |
| Classification | Each employee's level under the award, based on their actual duties | Staff doing higher duties still paid at entry level |
| Base rates | Pay rate against the current award minimum for that level | Rates not updated on 1 July |
| Casual loading | Loading applied, and on the right base | Loading included in a flat rate that's below the minimum |
| Penalty rates | Evenings, weekends, public holidays | Sunday paid at the Saturday rate; public holidays missed |
| Overtime | Daily and weekly overtime triggers, rostering rules | Overtime not paid on long days; time off in lieu without a written agreement |
| Allowances | Tools, uniforms, meal, travel, first aid, leading hand | Allowances never set up in payroll |
| Leave | Accruals, leave loading, payout on termination | Leave loading missed; part-timers accruing at the wrong rate |
| Annual salaries | Whether a salary covers what the award would pay for the hours actually worked | Salaried managers working 55-hour weeks |
| Super | Super paid on the right earnings, on time | Super missed on some allowances or on back pay |
| Records and payslips | Time records, payslip content and timing | No record of hours for salaried staff |
How does an underpayment audit work?
- Scope. We agree which employees, which period and which awards. If you're worried about one issue (say, Sunday rates), we start there; if the risk is broad, we sample first.
- Gather the data. Payroll reports, rosters, timesheets or clock data, employment contracts and position descriptions. If your payroll runs through us, most of this is already in your file.
- Run the comparison. Our award underpayment audit agent checks every employee's pay against the award, line by line, and quantifies the gap. It flags results that look too large to be real, which usually means a data problem rather than an underpayment.
- Accountant review. A qualified accountant reviews the classifications, assumptions and results before you see anything. Classification in particular needs judgement about what people actually do.
- The report. Each employee's shortfall (or confirmation they were paid correctly), the back pay, the super shortfall, a risk rating, and the cause.
- Fix it. Payroll settings corrected, back pay calculated and paid through payroll with super, and the change reported through Single Touch Payroll.
- Legal input where needed. For large or systemic underpayments, we brief an employment lawyer on disclosure, employee communications and any regulator contact.
Worked example: the Sunday rate that wasn't
Example: Say a café pays its casual staff the Saturday penalty rate on Sundays, a gap of $4 an hour. Eight casuals each work an 8-hour Sunday shift most weeks, about 40 Sundays a year.
| Item | Per employee, per year | All 8 staff, 3 years |
|---|---|---|
| Underpaid wages (8 hours × $4 × 40 Sundays) | $1,280 | $30,720 |
| Super on that back pay at 12% | $154 | about $3,700 |
| Total before interest or penalties | $1,434 | about $34,400 |
Found in year one, that's a few thousand dollars and a payroll setting. Found in year six, by a former employee's lawyer, it's a very different conversation. The figures here are illustrative only; your award sets the actual rates.
Is your worker an employee or a contractor?
Calling someone a contractor doesn't make them one. Different laws use different tests, and you can get a different answer under each.
| Law | Test | Consequence if they're an employee |
|---|---|---|
| Fair Work Act | Whole-of-relationship test since 26 August 2024: looks at how the work is actually done, not just the contract | Award wages, leave, notice, unfair dismissal protection; sham contracting penalties |
| Tax (PAYG withholding) | Common-law employment tests | You should have withheld tax and reported through STP |
| Superannuation guarantee | Includes the expanded rule for contractors paid wholly or principally for their labour | Super payable even to some genuine contractors |
| Payroll tax and workers compensation | State and territory tests, which include some contractors | Payroll tax and premiums on contractor payments |
The super test catches the most people. A sole trader working mainly for you, paid by the hour for their labour, can be owed super even if they're a genuine contractor. Our employee vs contractor guide explains each test, and our payroll tax by state guide covers the state rules.
Casual employment has its own definition too. Since 26 August 2024, whether someone is a casual depends on the real nature of the relationship, including whether there's a firm advance commitment to ongoing work. Casuals who work regular patterns can have a right to move to permanent employment.
Our employment law agent answers Fair Work, award, leave, notice and contractor questions, with the relevant section and source. Your accountant reviews the answer, and where you need legal advice, we say so.
What about employees on visas?
Workers on visas have the same workplace rights as everyone else: the same award, the same super, the same protections. Their visa conditions add some checks for employers:
- Check work rights before they start, and when visas change, using the government's VEVO service.
- Respect work limits. Student visa holders, for example, are generally limited to 48 hours per fortnight while their course is in session.
- Sponsored workers must be paid at least the market salary and any income threshold for their visa, and sponsors have their own record-keeping and notification obligations.
- Never ask for money back or for payment in exchange for sponsorship. That's unlawful.
Our visa worker employment agent covers sponsorship obligations, pay thresholds and work limits for each common visa. Migration advice, including whether to sponsor someone, is for a registered migration agent or lawyer.
Where do WHS and workers compensation fit?
They're not accounting work, but they're tied to your payroll, so we flag them:
- Workers compensation insurance is compulsory for employers in every state and territory, and premiums are usually based on declared wages. Declaring wages correctly, including some contractor payments, is part of payroll compliance. Our workers compensation agent explains the scheme in your state.
- Work health and safety duties apply to every business, with incident notification rules and penalties that differ by state. Our WHS agent gives the starting answer; for a safety system or an incident, you need a WHS consultant or lawyer.
How does it work with BPAG, and what does it cost?
- Free conversation. Tell us the industry, the award, headcount and what worries you.
- Fixed quote based on the number of employees, the period and the quality of the records.
- Audit and report as set out above.
- Fix and prevent: payroll corrected, back pay paid with super, and a schedule for future checks, at least every 1 July when rates change.
Our agents draft the comparison and the report; qualified accountants review every classification and figure, and nothing is sent to an employee or paid without your approval. Employment law questions that need legal advice go to an employment lawyer, whom we brief.
Ongoing payroll for up to 10 staff is included in our Business Insights plan, and we check award rates every 1 July as part of it. Plans are on our pricing page, and our payroll and Payday Super service explains how we run pay.
Honest alternatives: if you have one or two employees on a simple award, the Fair Work Ombudsman's free pay calculator and an annual check of rates each July may be enough. Where we help most is businesses with several classifications, weekend and evening work, salaried staff on long hours, casuals, or a history of manual payroll.
What should you send us?
- The award or enterprise agreement you believe covers your staff
- Payroll reports for the period (pay rates, hours, allowances, super)
- Rosters, timesheets or time-clock data for the same period
- Employment contracts, offer letters and position descriptions
- Any annualised salary arrangements or individual flexibility agreements
- For visa holders, the visa subclass and conditions
- Contractor agreements for anyone you pay as a contractor
The industries where we see the most pay complexity include hospitality, trades and construction and NDIS providers.
Frequently asked questions
How far back can an employee claim underpaid wages?
Generally up to six years under the Fair Work Act. That's why we usually look back over several years when an audit finds a systemic issue, and why keeping time and wage records properly matters. Super shortfalls carry their own ATO consequences on top.
Can I pay above-award salaries to cover penalty rates and overtime?
Often, yes, if the award allows an annualised wage or the arrangement is set up properly, and you regularly check that the salary actually covers what the award would have paid for the hours worked. Many underpayments come from salaries that looked generous but didn't cover long weeks or weekend work. We test the salary against real rosters.
What records must employers keep?
Employers must keep time and wage records for each employee for 7 years and issue a payslip within one working day of payday. Records include hours worked, pay rates, overtime, penalties, allowances, leave and super. Missing records make it hard to defend a claim, and in some cases the burden shifts to the employer to disprove it.
Should we tell the Fair Work Ombudsman about an underpayment?
Self-reporting can be the right choice, particularly for larger or systemic underpayments, and the Ombudsman takes cooperation into account. It's a decision to make with an employment lawyer, after you know the size of the problem. We quantify it; the lawyer advises on disclosure.
Do I have to pay super on back pay?
Yes, where the back pay is for ordinary hours or other amounts that attract super. Under Payday Super, back pay paid on or after 1 July 2026 is treated as qualifying earnings on the day it's paid, and the super must reach the fund within the usual deadline. Older periods may also have super guarantee charge consequences.
Is the Fair Work Ombudsman's pay calculator enough?
For checking one employee's rate for one shift, it's a good free tool and we encourage employers to use it. It doesn't audit your whole payroll, apply rates across several years, calculate super shortfalls or find classification errors. That's what an audit adds.
Official sources
General information only, current as at 18 October 2026. It is not personal tax, legal or financial product advice and doesn't take your circumstances into account. Talk to us before you act. Where a recommendation needs a licensed financial adviser or a solicitor, we work alongside them.