Why Pay and Award Compliance Matters in Australia
Pay and award compliance in Australia has become a major focus for employers, regulators, and the Fair Work Ombudsman. With increasing audits, penalties, and high-profile underpayment cases, businesses must ensure they meet their legal obligations under workplace laws. In our recent HR Bites webinar: Back to Basics – Pay & Award Compliance, Harrisons Managing Director Claire Harrison explored the core fundamentals employers need to get right—and where many organisations are still going wrong. The session highlighted how even well-resourced businesses are facing compliance challenges, reinforcing the need to regularly review pay practices and award obligations. Recent data highlights the scale of the issue:- $473 million recovered in unpaid wages in 2023–24
- $358 million recovered in the following year
- Over $2 billion recovered in the past five years
What Is Award Compliance?
Award compliance refers to meeting the minimum pay rates and employment conditions set out in modern awards under the Fair Work Act 2009. Employers must ensure employees receive:- Minimum wages
- Overtime and penalty rates
- Allowances
- Leave entitlements
Understanding the Australian Workplace Relations System
To achieve compliance, employers must understand the hierarchy of workplace laws:- Fair Work Act 2009 – Governing legislation
- Fair Work Regulations 2009 – Supporting regulations
- National Employment Standards (NES) – Minimum entitlements
- Modern Awards – Industry or occupation-specific conditions
- Enterprise Agreements – Must pass the BOOT
- Employment Contracts – Cannot undercut legal minimums
Modern Awards in Australia: Getting Coverage Right
There are 122 modern awards covering most employees across industries and occupations.Common Award Compliance Mistakes:
- Applying the wrong award
- Assuming no award applies
- Choosing an award based on convenience
- The nature of the business
- The work performed by employees
Employee Classification and Pay Compliance
Correct classification is essential for wage compliance in Australia. Each award includes classification levels based on:- Skills and qualifications
- Duties and responsibilities
- Level of supervision
Best Practices for HR Compliance:
- Regularly review employee roles
- Update classifications when responsibilities change
- Avoid over-classifying roles to increase pay
Annualised Salaries and the Better Off Overall Test (BOOT)
Many organisations use annualised salary arrangements or Individual Flexibility Agreements (IFAs). However, compliance requires meeting the: Better Off Overall Test (BOOT) Employees must be: Better off overall compared to the relevant modern award.What Employers Must Do:
- Compare salary against award entitlements
- Include overtime, penalties, and allowances
- Review actual hours worked
How to Conduct a Pay Compliance Audit
A pay and award compliance audit is critical for managing risk.Step-by-Step Checklist:
- Confirm the correct modern award
- Validate employee classifications
- Compare pay rates to award minimums
- Include all entitlements (penalties, overtime, allowances)
- Test compliance against BOOT
- Review regularly
New Laws: Criminal Penalties for Wage Underpayment
From 1 January 2025, intentional wage underpayment is a criminal offence under Australian law. Penalties include:- Up to 10 years imprisonment
- Fines up to $8.25 million for companies
- Back payments
- Civil penalties
- Reputational damage
Key Takeaways for Employers
To stay compliant with Australian workplace laws:- Always confirm correct award coverage
- Ensure accurate classification of employees
- Regularly review salary arrangements
- Conduct ongoing compliance audits
- Monitor Fair Work updates and legal changes
Need Help with HR Compliance?
At Harrisons, we support businesses with:- Pay and award compliance audits
- HR compliance advice
- Employment contracts and salary structuring
- Risk management and Fair Work compliance
Claire Harrison is the Founder and Managing Director of Harrisons, a flourishing HR consulting business that sprouted in 2009 from Claire’s passionate belief that inspiring leaders and superstar employees are the key success factor to any business. With over 20 years’ experience, Claire has worked as a HR Director of multi-national organisations, as a Non-Executive Board Director, and a small business owner. Claire’s corporate career includes working with companies such as BHP, Westpac, Fonterra and Mayne Nickless.
