Why payroll compliance is a non-negotiable for all companies

Why payroll compliance is a non-negotiable for all companies

The Fair Work Ombudsman (FWO) has released their priorities for the financial year and stated that large corporates are one sector of focus for addressing underpayments and workplace protections. If you are an executive or director – particularly a large corporation in Australia – these priorities are a strong reminder to revisit your payroll compliance procedures and governance to amend any issues. 

While non-compliance may occasionally come from intentional actions, it often stems from simple errors, such as misinterpreted industrial instruments or outdated systems and configurations. Regardless of the reason, public opinion and the FWO’s judgement will be equally severe.

For this reason, organisations must thoroughly review and address any payroll issues proactively to maintain compliance and protect the company’s reputational and financial standings. The FWO’s priorities include providing education, advice and assistance to organisations. Requesting support before issues expand and compound could greatly benefit your compliance efforts. The following blog shares some of the steps you can take to improve your payroll governance.

Compensate employees fairly in annualised salary arrangements

Annualised salary arrangements in Australia cover the base salary and entitlements such as overtime, penalty rates, and allowances otherwise paid under the relevant modern award. The FWO’s efforts in FY2023 recovered about $220 million in underpayments for nearly 140,000 workers from the large corporates sector. 

Companies with staff on annualised salaries must undertake an annual reconciliation process to ensure that the actual salary meets or exceeds the minimum entitlements stipulated in the modern award. If any discrepancies arise during this reconciliation, the organisation should promptly reassess the salary and conditions and make good on the difference to the employee – minimising the risk of repercussions.

Good record-keeping is key to supporting this process. Corporations must keep records detailing work hours, overtime, meal breaks, and other allowances. These records also serve as evidence to demonstrate that people have received fair compensation according to their annualised salary agreements and the requirements of their awards.

Source: Office of the Fair Work Ombudsman.

Enterprise Bargaining Agreements and Modern Awards

Enterprise Bargaining Agreements (EBAs) and Modern Awards set out wages and conditions of employment. They may differ in structure and content but ultimately have the same objective. They operate in addition to the minimum standards to protect all employees, with or without an agreement or award.

EBAs outline the terms and conditions of employment and may be specific to a single business or govern conditions for a  group of businesses. Organisations operating under an EBA do so as these agreements meet the company’s specific needs, providing a framework that governs working conditions and wages. They are legally binding, approved by the Fair Work Commission (FWC), must meet the Fair Work Act 2009 standards and pass the better off overall test (BOOT) by providing employees equal or better terms than the comparable Modern Award.

Modern Awards are similar instruments designed to more generically cover the employment conditions of a specific industry or type of work. Each industry or position has a Modern Award covering the type of work completed, employment obligations and wages.

If companies do not adhere to the relevant Award or EBA and fail to rectify any issues, they will experience financial penalties from the FWC and reputational damage if the breaches become public knowledge. This includes meeting wage obligations, providing the correct entitlements, and following dispute resolution procedures.

Maintaining compliance with these employment obligations requires businesses to conduct periodic internal audits to ensure ongoing adherence and to establish clear channels for employee feedback and queries that may be raised. Keeping accurate and up-to-date records of all employment conditions and obligations is critical to reduce the chances of non-compliance.

Achieve effective payroll governance

Payroll governance refers to the system of policies, procedures, and practices that ensure the accurate and timely management of a company’s payroll functions. It encompasses compliance with tax laws and employment standards. Good payroll governance mitigates risks associated with legislative non-compliance and incorrect financial reports for large corporations.

An effective payroll governance framework includes good record-keeping that details employee roles, responsibilities, and changes in employment conditions. These records should encompass all aspects of payroll compliance, such as Single Touch Payroll (STP), Pay As You Go (PAYG) withholding, Fringe Benefits Tax (FBT), and superannuation contributions, as well as wages and entitlements. 

A systematic approach to governance ensures your team manages all elements of payroll per legal requirements and corporate policies, particularly in response to legislative changes. Companies should establish a regular process for reconciling STP data with PAYG withholding and other tax obligations, conducting validation checks and comparisons of actual pay against the EBA or award conditions and maintaining a positive record of BOOT testing. These reconciliation processes enable a company to correct discrepancies, avoid penalties and provide accurate reports to the relevant governing bodies and regulators.

Address issues before a review or audit

With so many people to manage in a large business, the potential for issues to go undetected may significantly increase. A systematic approach to governance and regular internal auditing can prevent these issues from escalating and being picked up by the FWO. Regular internal audits will highlight inconsistencies and errors in payroll systems, allowing the organisation to rectify the underlying issues, compensating employees if necessary and reducing the impact of recurrence. It is a process that not only reviews the accuracy of payroll calculations but also assesses the alignment of payroll practices with current employment obligations.

An integral part of the audit process includes verifying payroll processes and calculations. This includes thoroughly reviewing employee data to ensure that records of wages, hours worked, and other remuneration details are current and accurate. A time and attendance solution, coupled with your payroll system, can automatically collect and store this information for you.

By identifying and addressing these issues internally, companies can avoid the repercussions of non-compliance, including financial penalties, reputational damage and eroding employee satisfaction. It is far more beneficial for an organisation to self-correct early than to be found in violation by external bodies.

Accurately configure payroll systems and processes

Large businesses have the complexity of managing a geographically dispersed or remote workforce with people covered by any number of modern awards and enterprise agreements. Award interpretation and payroll systems that handle such complexity help avoid non-compliance risks.

Centralising payroll functions across the business with sophisticated solutions is key. Central payroll systems should integrate with localised timekeeping and reporting to cover all aspects related to payroll, from hours worked to entitlement calculations.

Award interpretation software, for example, supports companies operating under Australia’s unique employment obligations. When maintained and configured well, these systems automatically process and apply the complex conditions of modern awards and EBAs so that their people are paid more accurately. They can significantly reduce cost and effort by automating the manual calculations and workarounds completed by the payroll team. Furthermore, award interpretation software can act as an ongoing, independent auditor of payroll accuracy by continuously verifying employee pay against legislative and award requirements. 


Payroll compliance is essential for every organisation in Australia, especially larger businesses, as they manage diverse workforces covered by different Modern Awards and EBAs. For large organisations managing staff on annual salaries, there must be a process to conduct yearly reconciliation and meet minimum requirements. Businesses must keep thorough records of employee details, hours worked, tax withheld, wages paid and other details.

Payroll Compliance software can support payroll teams in maintaining compliance and provide detailed information as part of your wider Governance Risk and Compliance (GRC) framework. Good record-keeping will support internal and external audits so the business can promptly address non-compliance issues and quickly provide accurate records when required.

Why choose Tambla’s payroll compliance solutions?

We have provided payroll compliance solutions for many years through Award and Agreement Interpretation Engines designed to accommodate Australia’s complex industrial instruments. 

We have proven expertise working with large enterprises and government organisations; we understand their requirements around payroll governance and can apply our payroll compliance platform to their unique requirements. Our solution is an easy-to-use, automated platform that fits into your GRC framework.

Visit our Payroll Compliance page for more on our capabilities.

Related blogs

How time and attendance software supports workforce compliance

Why place award interpretation software high on your priority list?

Pay Compliance: Your key to payroll accuracy and governance

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