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Avoiding Wage Underpayment

Reading about wage underpayment in the news is becoming far too frequent; according to an audit report by the Fair Work Ombudsman (FWO), it found that *56% of businesses were in breach of workplace laws, with *69% of employers stating that they were unaware of applicable workplace relations obligations.

The question then is, why does it keep happening and how can business owners protect themselves from becoming a statistic? 

Wage non-compliance can arise for a number of reasons, often it sits with a lack of training or systems within the payroll and finance departments that adds up over time and with a growing workforce. 

As the FWO identified, lack of knowledge around applicable modern awards is a consistent cause of wage non-compliance. Awards and classifications are often changing and adapting to fit the current climate, having reduced from more than thousands of awards pre 2010 to approximately 156 at current. Keeping up to date with these changes and how they relate to your employees is the difference between being compliant and not. 

The review process, or lack of, is another leading cause of wage non-compliance. Reviewing employee classifications and updating where applicable is an essential part of meeting compliance. This also aligns with the importance of taking care with employment contracts and updating where necessary to ensure all records are current. 

Changes were recently made to annual wage arrangements in some Awards by the Fair Work Commission in a bid to prevent further wage underpayment. Investigations found that often the amounts paid were not sufficient to offset what an employee would have been entitled to if paid their Award entitlements. If your industry permits annual wage arrangements, it’s critical to be compliant with the relevant Award to avoid wage underpayment. 

Failure to record employee hours of work, including breaks makes it difficult for an employer to calculate an employee’s minimum entitlements. Not incorporating systems to record employee hours from an early stage can be challenging in the long term particularly if your business begins to grow. 

Ensuring your payroll is configured accurately to relate to overtime, superannuation, loadings and allowances where applicable is critical. Similarly, incorrect calculation of leave accruals can be quite costly in the long term with one slight miscalculation in the beginning having the potential to add up over time, particularly if it impacts multiple employees. 

Being armed with the right workplace relations information is crucial to the success of your business. Working closely with a range of clients, our workplace relations specialists have the knowledge and skills you need to help you manage your workforce and stay on top of your workplace relations obligations.

If you have any questions relating to modern award wages and classifications, or other workplace relations matters, contact our team.

* Fair Work Ombudsman, Combined Campaigns Compliance Report (April 2020).

Need Help

Workplace Partners is available to assist you with any queries on 1300 116 400 or email [email protected].

The information contained within this article is not legal advice and is for general advice only, to obtain specific advice for your business contact us on 1300 116 400 or email [email protected], this advisory service if free for all subscribers. To find out more about Workplace Partners visit us at

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