$5.3 Million in Underpayments: Why Payroll Compliance Is a Leadership Responsibility
Discover why payroll compliance matters for every Australian employer and how regular HR and wage compliance audits can help reduce costly underpayment risks.
Fair Work’s latest aged care investigation is a reminder that wage compliance is not just a payroll issue. It is a business risk that requires active oversight from owners, executives and boards alike.
The Fair Work Ombudsman’s recovery of more than $5.3 million in underpayments for nearly 3,600 aged care workers has once again highlighted the significant risks organisations face when payroll systems, workforce practices and compliance oversight fall out of step with workplace obligations.
The investigation found that 13 of 22 aged care providers reviewed had breached workplace laws, resulting in substantial back-payments to employees. The average underpayment was reported at $1,478 per employee.
While the findings relate to aged care providers, the lessons extend far beyond the sector. The compliance issues identified by the Fair Work Ombudsman are common across many Australian workplaces and can affect organisations of any size, regardless of whether they are owner-operated businesses, not-for-profit organisations, professional practices or large enterprises.
The issue is rarely intentional
One of the most important observations arising from the investigation is that the underpayments were largely linked to operational and compliance failures rather than deliberate misconduct.
The Fair Work Ombudsman identified recurring issues including:
- Incorrect employee classifications
- Errors in overtime calculations
- Underpayment or non-payment of broken shift entitlements
- Failure to pay minimum engagement periods
- Record-keeping and payslip deficiencies
- Failures to provide Fair Work Information Statements to employees.
These are precisely the types of errors that can arise when payroll systems are not regularly reviewed, award interpretations are not updated, or workforce arrangements evolve faster than organisational controls.
In isolation, these mistakes can appear minor. Across dozens, hundreds or even thousands of employees, they can quickly escalate into significant financial liabilities.
A workforce challenge at scale
The providers investigated were headquartered across Victoria, New South Wales, Queensland, South Australia and Western Australia, with many operating in multiple jurisdictions. The Fair Work Ombudsman has not published a state-by-state breakdown of the identified underpayments, however the investigation demonstrates the complexity involved in managing modern workforces across different locations and employment arrangements.
According to Australian Institute of Health and Welfare workforce data, more than 258000 people are employed in residential aged care services across Australia, with New South Wales accounting for approximately 31 per cent of the workforce, Victoria 24 per cent and Queensland 21 per cent.
While these workforce figures do not indicate where underpayments occurred, they illustrate the scale of employment within the sector and the challenges employers face in maintaining compliant payroll and rostering practices across large and geographically dispersed workforces.
Why every organisation should take notice
It would be a mistake for employers outside the aged care sector to view this as someone else’s problem.
The causes of non-compliance identified by the Fair Work Ombudsman are frequently encountered in sectors such as:
- Healthcare
- Disability and NDIS services
- Childcare and early education
- Hospitality
- Retail
- Construction
- Professional services
- Community and not-for-profit organisations.
Any organisation managing award-covered employees, complex rostering arrangements, overtime, allowances or multiple classification structures faces similar compliance risks.
At Akyra, we regularly see organisations surprised to discover that payroll risks often arise not from one major failure, but from small inaccuracies that remain undetected over long periods.
A classification that has never been reviewed, a payroll rule that was configured incorrectly years ago, or a misunderstood entitlement can create a significant financial exposure when multiplied across an entire workforce.
Payroll compliance is a leadership responsibility
Historically, wage compliance has often been viewed as the responsibility of payroll or HR. Increasingly, regulators and stakeholders expect a broader level of organisational accountability.
Whether oversight sits with a business owner, Managing Director, CEO, Executive Team, Practice Manager, Leadership Team or Board, organisations should ensure there is clear ownership of workforce compliance.
Effective oversight includes:
- Regular wage compliance audits
- Periodic review of classifications against applicable awards and enterprise agreements
- Validation of payroll system calculations following award or legislative updates
- Review of overtime, allowances, penalties and minimum engagement provisions
- Training for leaders, managers and payroll personnel on workplace obligations
- Strong record-keeping and payslip practices
- Independent review of high-risk or uncertain areas.
The common factor is not organisational size. It is leadership attention.
Organisations that actively monitor compliance risks are significantly better positioned to identify issues early, correct errors promptly and demonstrate due diligence if concerns arise.
The AKYRA perspective
The Fair Work Ombudsman’s latest enforcement activity serves as a timely reminder that payroll compliance should be viewed through both an operational and risk management lens.
Payroll systems are invaluable tools, but systems alone do not ensure compliance. Classifications need to be correct. Awards need to be interpreted accurately. Workforce arrangements need to be regularly reviewed as organisations grow and evolve.
Whether your organisation is led by an owner, executive team, committee or board, the underlying principle remains the same… employees must receive their lawful entitlements, and leaders must have confidence that the systems supporting those outcomes remain fit for purpose.
The cost of a proactive compliance review is almost always lower than the cost of employee claims, regulatory intervention, back-pay obligations and reputational damage.
The organisations most likely to avoid these outcomes are not necessarily those with the largest HR functions or the most sophisticated payroll platforms. They are the organisations that make compliance a leadership priority, regularly test their assumptions and act early when risks are identified.
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Disclaimer – Reliance on Content
The material distributed is general information only. The information supplied is not intended to be legal or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice concerning your specific situation.
Sources
- Fair Work Ombudsman, Aged care investigations recover $5.3 million for underpaid workers (28 August 2026).
- On Notice, $5.3m Recovered For 3,600 Underpaid Aged Care Workers (31 August 2026).
- Australian Institute of Health and Welfare, Aged Care Workforce.
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