Boards routinely ask management to confirm that employees are paid correctly. Since the introduction of the criminal offence for intentional underpayment, that confirmation carries greater weight, and boards should expect it to be supported by tested evidence.
From 1 January 2025, intentionally failing to pay amounts owed under the Fair Work Act 2009 (Cth), a modern award or an enterprise agreement has been a criminal offence. The offence requires intent and does not apply to genuine error. Identifying an error does not by itself establish criminal intent. Employers should investigate and correct identified shortfalls promptly; criminal liability depends on the statutory elements and the evidence. The Fair Work Ombudsman cannot refer an employer for prosecution where it is satisfied the employer complied with the Voluntary Small Business Wage Compliance Code.
A statement that payroll is compliant should rest on a documented interpretation of the applicable award or agreement and on testing of the payroll system against that interpretation. It also requires clear ownership of the response when testing identifies a problem.
The first point we examine is the handover between those who interpret an agreement and those who configure the payroll system. A clause may be interpreted one way when an agreement is made and configured differently years later. An allowance that depends on a specific trigger can end up paid as a flat amount, or not paid at all.
Payday Super adds to this exposure. Since 1 July 2026, superannuation must be calculated on qualifying earnings and generally received by the fund within seven business days of each payday. A 20-business-day period applies in specified cases, including certain first contributions for a new employee or fund. An error in the pay codes that determine qualifying earnings is repeated in every pay run.
We would expect a well-supported assurance to include:
- A documented set of pay rules, each referenced to its source clause.
- Evidence that the payroll system has been tested against those rules using actual pay records, beyond configuration sign-off.
- A register of exceptions, with an accountable owner for each.
- A recorded decision on the response to any underpayment identified, including whether to self-report.
A full back-pay review is not required at the outset. Testing a sample of one agreement and one employee group can help assess whether a broader review is warranted. Where no issues are found, the results provide assurance only within the scope and limitations of the testing. Where issues are identified, the organisation can decide its response, including whether to self-report, before the matter is raised externally.
Sources
- Fair Work Ombudsman, Criminalising wage underpayments (opens in a new tab)https://www.fairwork.gov.au/about-us/workplace-laws/legislation-changes/closing-loopholes/criminalising-wage-underpayments-and-other-issues
- Fair Work Ombudsman, Tax and superannuation (opens in a new tab)https://www.fairwork.gov.au/pay-and-wages/tax-and-superannuation