Payroll Remediation in Australia: The Complete Guide for CFOs and CHROs

Woolworths discovered payroll errors in 2019 that eventually cost the company $750 million. NAB announced a $130 million remediation programme in 2025, its second major payroll failure in five years. The University of Melbourne repaid $22 million to 15,000 employees after reviewing 3.2 million payslips.

These organisations share a common pattern. Initial estimates expand during full reviews, often by multiples of the original figure.

Payroll remediation identifies, calculates and repays wage underpayments to employees. The process reviews historical payroll data, determines gaps between actual and required payments, and fixes the systems that caused the errors.

Criminal wage theft provisions commenced on 1 January 2025. Intentional underpayments carry penalties of up to 10 years imprisonment for individuals and $7.825 million for corporations.

This guide examines the remediation process from root causes through resolution. It covers Fair Work Act obligations, proactive versus reactive approaches, and timeframes and costs from case studies.

What Is Payroll Remediation?

Definition and scope

Payroll remediation occurs when organisations identify employee underpayments and must calculate and repay the shortfall.

The scope extends beyond repayment. Organisations review historical payroll data, determine what should have been paid under applicable awards or enterprise agreements, and calculate gaps for each pay period.

They must repay underpaid wages plus superannuation and typically interest. They must also fix underlying systems and processes and implement controls to prevent recurrence.

The Fair Work Ombudsman expects organisations to look back at least six years. Woolworths reviewed payroll back to 2010, covering nine years before discovery in 2019.

Common triggers

Self-identification during system changes reveals configuration errors most frequently. Woolworths discovered underpayments when implementing a new enterprise agreement. NAB identified issues during HR system upgrades.

Employee complaints trigger internal reviews that uncover broader patterns. A single query about penalty rates can expose systemic calculation errors affecting hundreds of employees.

External investigations force comprehensive reviews. Fair Work Ombudsman investigations, union complaints and whistleblower reports all initiate remediation programmes.

New leadership often commissions payroll audits. Incoming CFOs and CHROs want to understand risk exposure, particularly after high-profile cases in their industry.

Major Australian Payroll Underpayment Cases

Woolworths: $750 million across retail operations

Woolworths announced payroll underpayments in October 2019, initially estimating $200-300 million.

The underpayments affected 5,700 salaried employees across supermarkets, Dan Murphy’s, BWS and Big W. Store managers received annual salaries that failed to account for actual hours worked, including weekend shifts and public holidays.

The cost ballooned as the review expanded. By November 2021, Woolworths settled a class action for $50 million covering 2010-2013. In February 2022, the total reached $571 million. A year later, an additional $70 million emerged in logistics, pushing the total past $750 million.

Interim payments reached employees by December 2019. Full remediation continued through 2023, more than four years after discovery. As of February 2023, $276 million remained unpaid.

The Federal Court examined the case in mid-2023, focusing on calculation methodology and whether the company could offset overpayments against underpayments.

Source: HCA Magazine

NAB: $130 million in systemic payroll failures

National Australia Bank announced a $130 million remediation programme in August 2025. This marked the bank’s second major payroll failure in five years.

NAB had spent $250 million between 2020 and 2022 remediating underpayments dating back to 2012. Three years after completing that programme, additional systemic failures surfaced.

Issues coincided with new enterprise agreement rollout and HR system upgrades. The Finance Sector Union labelled the underpayments “systemic wage theft”.

The pattern demonstrates how payroll compliance issues persist even after substantial remediation investments. NAB’s underlying systems, processes or governance remained inadequate despite the previous $250 million spend.

University of Melbourne: $22 million affecting 15,000 employees

The University of Melbourne reviewed 3.2 million payslips in 2022 and identified $22 million in underpayments.

60 per cent related to minimum engagement periods. 30 per cent involved unpaid weekend work and overtime. The average underpayment per employee was $1,476.

The review focused on casual employees over eight years. The university had failed to fulfil full entitlements under its enterprise agreement.

Qantas: $7.1 million in misclassification issues

Qantas underpaid 638 marketing and administrative staff $7.1 million between June 2011 and June 2019.

The airline classified these employees under individual contracts rather than enterprise agreements. They didn’t receive minimum terms for wages, overtime, annual leave and superannuation.

Some employees were owed up to $141,717. The company also identified $22 million in overpayments to other employees, which it chose not to recover.

The eight-year duration demonstrates how classification decisions made during initial employment perpetuate through every subsequent pay period.

Australia Post: $5.6 million in system errors

Australia Post repaid $5.6 million to 3,600 employees in 2024 after discovering system errors spanning 2014 to 2023.

The underpayments resulted from configuration issues rather than deliberate decisions. Technical errors in payroll systems persisted undetected for a decade.

Why Payroll Underpayments Happen

Lack of documented payroll rules

Most organisations don’t have payroll rules documented in a clear, accessible format.

Awards and enterprise agreements leave room for interpretation. They contain contradictions and ambiguities requiring judgment calls. When X happens, what should the organisation do? These decisions rarely get documented in a maintainable way.

When documentation exists, it typically appears in Excel spreadsheets with thousands of rows. Five people maintaining the same spreadsheet will interpret and update it five different ways. The documentation becomes unreliable, then unused.

Critical knowledge lives in people’s heads rather than systems. A payroll manager knows how to handle scenarios because they’ve done it for years, but that knowledge transfers poorly to new staff or system implementations.

Without documented rules, organisations can’t verify whether payroll systems are configured correctly.

System configuration and maintenance failures

Payroll systems configured incorrectly at implementation perpetuate errors through every subsequent pay period.

Implementation forces rushed decisions about payroll rules. Vendors need answers to configure systems, but organisations haven’t had necessary internal conversations to agree on interpretations. Implementation teams make assumptions, configure systems based on those assumptions, and move forward without validation.

The “fire and forget” approach compounds the problem. Organisations configure systems correctly at go-live, test thoroughly, and assume accuracy indefinitely. Modern awards change. Enterprise agreements get renegotiated. System configurations don’t update to match.

NAB’s case demonstrates this pattern. The bank identified issues coinciding with new enterprise agreement rollout and HR system upgrades. Configuration assumptions that worked under previous agreements became inaccurate under new terms.

Process and governance gaps

Organisations lack systematic processes to detect and correct payroll errors before they escalate.

Implementation rushes critical decisions. When vendors ask configuration questions, organisations must provide answers quickly to keep projects on schedule. These rushed decisions don’t include all stakeholders, and resulting agreements aren’t documented for future reference.

No self-correcting mechanisms exist in most payroll operations. Manufacturing processes include monitoring thresholds and feedback loops that trigger alerts. Payroll rarely implements equivalent controls.

Basic metrics go untracked. Pay run duration, complaint volumes, total payroll costs as percentage of revenue—these indicators could reveal emerging issues. Most organisations don’t monitor them systematically.

Knowledge and expertise issues

Large organisations typically engage Big Four consulting firms for payroll audits and remediation.

These firms use junior consultants with two years of experience to perform detailed payroll analysis. The consultants are intelligent and capable, but they lack pattern recognition from decades of payroll experience.

Senior partners manage 20 simultaneous projects and can’t review nuance and detail in each engagement. Their hourly rates make hands-on data analysis uneconomical.

The business model relies on junior staff doing volume work whilst expensive partners provide oversight. This structure works for many services but struggles with payroll compliance, where subtle errors in large datasets require experienced eyes.

Audit scopes compound the problem. Junior consultants stick to defined scopes and miss obvious issues outside those boundaries. Experienced payroll professionals would recognise peripheral problems.

Organisational and cultural factors

Career risk influences vendor selection more than vendor capability.

Nobody gets fired for hiring Deloitte. Executives choosing between recognised Big Four firms and specialist boutique consultancies face asymmetric risk. If the Big Four firm fails, the executive made a defensible choice. If the boutique firm misses something, the executive faces questions about vendor selection.

This dynamic perpetuates mediocre outcomes. Organisations use the same firms, follow the same processes, and experience the same failures repeatedly.

Comfort with ambiguity enables dysfunction. Some individuals find power in grey areas where rules aren’t clearly defined. Forcing clarity through documentation would eliminate their informational advantage.

Investment priorities favour financial accounting over payroll accuracy. Organisations spend substantially more on financial statement audits than on ensuring employees are paid correctly.

The multiplier effect

Errors at the foundation multiply through every downstream process.

If initial payroll rules contain variation and ambiguity, everything built on those rules amplifies the variation. Data collection multiplies errors. System configurations multiply them further. Calculations and reporting multiply them again.

Australia Post’s decade of system errors illustrates this principle. Configuration issues persisted from 2014 to 2023, affecting 3,600 employees and accumulating $5.6 million in underpayments. The initial configuration error was probably small, but it compounded through 10 years of pay cycles.

The Payroll Remediation Process

Discovery phase

Self-identification occurs most commonly during system changes. Implementing new enterprise agreements reveals inconsistencies. System upgrades expose configuration errors that operated invisibly in legacy systems. Woolworths discovered issues when implementing a new enterprise agreement.

Internal reviews trigger broader investigations. A payroll manager reviewing overtime calculations might notice patterns suggesting systematic errors. Finance teams reconciling labour costs might identify anomalies warranting deeper analysis.

Employee complaints often reveal systemic problems. A single query about penalty rates can expose calculation errors affecting entire cohorts.

External triggers force immediate action. Fair Work Ombudsman investigations, union complaints, whistleblower reports and class action initiations all accelerate discovery timelines.

New leadership commonly commissions payroll audits. Incoming CFOs and CHROs want to understand risk exposure, particularly after high-profile cases in their industry.

Initial response: stopping the bleeding

Organisations must act within days of discovering potential underpayments.

Stop ongoing underpayments immediately. Even without complete information about historical errors, organisations must implement interim payment adjustments. The Fair Work Ombudsman expects organisations to prevent additional underpayments during remediation.

Self-report to gain safe harbour. Organisations that report broad or systemic non-compliance before investigation commences can access protection from criminal prosecution. Once the FWO becomes aware through other channels, subsequent notification won’t be treated as voluntary disclosure.

Form project teams quickly. Internal payroll, HR, legal and finance staff plus external advisers mobilise within days. Listed companies involve boards immediately. Material financial impacts require ASX disclosure.

Scope determination

The Fair Work Ombudsman expects minimum six-year lookback under statutory limitation provisions. Organisations should review as far back as records allow and to when non-compliance began. Woolworths went back to 2010, nine years before 2019 discovery.

Which employee cohorts are affected? Which industrial instruments apply? Which types of entitlements require review? The analysis covers current and former employees across all geographic locations.

Data requirements include employee records for the full period, timesheets and rosters, payslips, award and enterprise agreement terms over time, and system configuration history.

Missing records create challenges. Multiple system migrations, inadequate retention and missing timesheets complicate calculations. When records are deficient, Fair Work Ombudsman guidance requires giving employees the benefit of the doubt.

Calculation and validation

Calculations must occur pay period by pay period. A 2025 Federal Court decision confirmed organisations cannot pool overpayments and underpayments across pay periods.

Components to calculate: base wage underpayments, overtime underpayments, penalty rate underpayments, allowance underpayments, leave entitlement underpayments, annual leave loading, interest (FWO best practice), and superannuation on all underpaid amounts.

Organisations must consult with employees, unions and workplace consultation bodies on methodology.

Third-party validation is typically mandatory. The Fair Work Ombudsman expects independent expert review of methodology and calculations.

Tax implications require ATO guidance. Back payments may push employees into higher tax brackets for historical years and potentially require amendments to previous tax returns.

Remediation and repayment

Interim payments often precede full calculations. Woolworths made interim payments by December 2019, less than three months after discovery, whilst full remediation continued for four more years.

Final payments include back wages, interest and superannuation.

Former employee outreach requires substantial effort. Multi-channel communication through email, letters, SMS, phone and workplace platforms forms part of this process.

Superannuation complications

Underpaid amounts trigger superannuation guarantee obligations under Section 559 of the Fair Work Act.

The Superannuation Guarantee Charge applies to late payments and includes the SG shortfall, nominal interest at 10% per annum, and a $20 administration fee per employee per quarter.

SGC differs from normal superannuation in three critical ways. It calculates on total salary and wages rather than ordinary time earnings. Nominal interest compounds from first day of quarter until lodgement and cannot be reduced or waived by the ATO. Most significantly, SGC is not tax deductible, unlike normal superannuation paid on time.

A company with 13 employees owing $37,250 in late superannuation would pay net $26,075 if paid on time after the 30% tax deduction. Paid late, SGC totals $42,405, with lost tax deduction of $11,175 and compliance costs of $5,000, for total $58,580. Being late cost an additional $32,505, or 87% more.

System fixes and prevention

Immediate fixes address obvious configuration errors and award interpretation mistakes. Manual controls provide stopgap measures whilst permanent solutions develop.

Longer-term solutions often require new payroll systems or major upgrades, process redesign, enhanced governance and controls, regular reconciliation processes, monitoring thresholds and alerts, payroll rule documentation systems, and training programmes.

The Fair Work Ombudsman may require ongoing independent audits of payroll at employer expense for three or more years. These requirements typically appear in enforceable undertakings that remain published on the FWO website indefinitely.

Reporting obligations

Organisations must report broad or systemic non-compliance to the Fair Work Ombudsman. Isolated payroll errors affecting employees for less than 12 months don’t require reporting if employees are informed, back paid promptly and the issue is fixed.

Other notification requirements include ASX disclosure for listed companies with material financial impacts, union notifications where members are affected, and communication to all current and former employees.

Legal and Regulatory Requirements

Fair Work Act obligations

Section 323 requires employers to pay employees amounts payable under NES, modern awards and enterprise agreements in full and on time.

Section 557C reverses the burden of proof when employers fail to keep proper employment records. Employers must disprove employee allegations rather than employees proving underpayment. This provision significantly increases risk for organisations with inadequate record-keeping.

The Fair Work Ombudsman released a Payroll Remediation Program Guide in May 2025 setting out expectations for methodology, communication and self-reporting.

Criminal wage theft provisions

Criminal penalties for wage theft commenced on 1 January 2025.

Individuals face up to 10 years imprisonment and $1.565 million (or 3x underpayment amount, whichever greater). Corporations face $7.825 million (or 3x underpayment amount, whichever greater).

Intentional underpayment requires knowledge that wages or entitlements are payable and a deliberate decision not to pay or to underpay. It does not require knowledge that conduct is illegal.

In the Priority Matters case, directors were found personally liable even though the court accepted they were hardworking, honest people who had taken all reasonable steps. They knew wages were owed and weren’t paid, which satisfied the intentional requirement.

Safe harbour provisions protect organisations that self-report to the Fair Work Ombudsman before investigation commences. Self-reporting must include an immediate remediation plan.

Director and accessorial liability

Section 550 of the Fair Work Act creates personal liability for individuals involved in contraventions.

Company directors, senior managers, HR managers, payroll officers, finance officers, external accountants, payroll service providers, business consultants and franchisors can all be held personally liable.

“Involved in” means aiding, abetting, counselling or procuring the contravention; inducing the contravention; being knowingly concerned in or party to the contravention; or conspiring with others to effect the contravention.

Directors must have intentional participation requiring actual knowledge that wages were payable and employees didn’t receive them. Knowledge that conduct was unlawful isn’t required.

Taking “all reasonable steps” to rectify underpayments doesn’t provide a defence to liability. The Priority Matters case confirmed directors were liable despite taking all reasonable steps.

Directors can be jointly and severally liable. A director’s personal assets can be targeted for recovery, even if the company enters liquidation.

The EZY Accounting case established that external accountants and payroll providers can be held personally liable for facilitating underpayments.

Record-keeping requirements

Organisations must maintain employment records for at least seven years.

Required records for each employee include full name, date of birth if under 21, start date, employment type, award or agreement classification with written notification to the employee, pay rate and calculation method, gross and net amounts paid, all deductions itemised, details of all payments including bonuses and allowances, and hours worked showing start and finish times for each shift.

Overtime records must show when the employee started and finished overtime work, not just total overtime hours. Leave records must capture type, when taken and balance.

Records must be readily accessible, in English or readily translatable, and legible.

Section 557C creates severe consequences for missing or inadequate records. When records are deficient, Fair Work Ombudsman guidance requires organisations to give employees the benefit of the doubt and calculate underpayments favourably to employees.

Penalties and enforcement powers

Standard contraventions carry penalties up to $16,500 per contravention for individuals and $82,500 per contravention for corporations. Serious contraventions committed with knowledge or recklessness face significantly higher penalties, multiplied by a factor of five.

The FWO can issue infringement notices as on-the-spot fines, negotiate enforceable undertakings that remain on the FWO website indefinitely, litigate in Federal Court or Federal Circuit Court, obtain court orders for back payment plus interest, secure compensation orders for affected employees, and obtain injunctions to prevent future contraventions.

The FWO’s 2023-24 Annual Report shows $473 million recovered for workers and $21.2 million in court-ordered penalties, the largest in the FWO’s 15-year history.

Enforceable undertakings typically require ongoing independent audits of payroll at the employer’s expense for three or more years. These undertakings remain published on the FWO website permanently, creating lasting reputational impact.

Insurance implications

Directors and Officers insurance typically excludes coverage for wage underpayments.

D&O policies exclude intentional or deliberate breaches, fines and penalties, criminal conduct, and wage underpayments that should have been paid as ordinary course of business. Most policies won’t cover the actual back wages owed to employees, superannuation underpayments, criminal penalties under wage theft laws, or civil penalties imposed by courts.

Limited D&O coverage may extend to defence costs for investigations and legal fees up to policy limits, and personal liability of directors in certain circumstances.

Employment Practices Liability Insurance may provide some coverage for defence costs and settlement amounts in some circumstances. EPLI typically excludes intentional violations, penalties and fines, and known issues at policy inception.

Wage underpayment remediation costs are almost never covered by insurance. Back wages, superannuation and interest represent ordinary business obligations that should have been paid, not insurable risks.

Proactive Audits vs Reactive Remediation

Benefits of proactive compliance audits

Criminal safe harbour protection shields organisations that self-report to the Fair Work Ombudsman before investigation commences. This protection from criminal prosecution under wage theft provisions became available when the laws took effect on 1 January 2025.

Reduced penalties follow from voluntary disclosure. The Fair Work Ombudsman treats self-reporting more favourably in enforcement decisions. Organisations that identify and report broad or systemic non-compliance early benefit from more lenient treatment.

Control over the narrative allows organisations to manage communications to employees, boards and markets on their own timeline. Proactive discovery means deciding when and how to disclose issues rather than responding to external investigation or media exposure.

Limited lookback periods become negotiable with proactive approaches. Organisations can often limit remediation to six years rather than extending further back.

Avoiding additional penalties matters significantly. George Calombaris’s hospitality group faced a $200,000 contrition payment on top of $7.8 million in underpayments when the Fair Work Ombudsman prosecuted the case. Proactive remediation typically avoids these additional payments.

Manageable remediation timelines result from finding issues early. Organisations can fix problems progressively rather than mobilising emergency response teams. System fixes prevent years of additional underpayments from accruing.

Avoiding enforceable undertakings preserves reputation. Court enforceable undertakings remain on the FWO website indefinitely and typically require ongoing independent audits at employer expense for three or more years. Proactive remediation may avoid these public compliance measures entirely.

Costs and timeframes: proactive vs reactive

The ongoing compliance approach involves regularly auditing data to tackle problems before they become widespread. Though it involves more frequent audits, each audit is smaller and relevant data remains readily available. This approach saves time and money compared to large-scale reactive remediation.

Reactive remediation costs escalate dramatically beyond the actual underpayments.

Court penalties reach up to $82,500 per contravention for corporations, potentially totalling millions across multiple contraventions. Contrition payments like the additional $200,000 imposed in the Calombaris case add further costs.

Enforceable undertakings require ongoing independent audits at employer expense for three or more years. These audit costs compound annually and operate under FWO oversight with no opportunity to negotiate scope or methodology.

Reputational damage translates to lost revenue from brand damage, increased recruitment costs and customer attrition. Executive time diversions affect hundreds of hours of CEO, CFO and CHRO attention pulled from strategic priorities to crisis management.

Share price impacts hit ASX-listed companies, which typically see material declines following underpayment announcements.

Insurance exclusions mean most costs aren’t covered by D&O or EPLI policies, contrary to what many executives assume.

Opportunity costs manifest through major projects delayed and strategic initiatives deferred whilst the organisation manages remediation.

Timeline compression creates additional pressure. Fair Work Ombudsman investigations demand responses to information requests within 14 to 21 days. The FWO may issue compliance notices requiring immediate action. Media pressure accelerates internal decision-making. Interim payments to employees may be required before full calculations are complete.

George Calombaris’s hospitality group initially reported less than $2 million in underpayments. The Fair Work Ombudsman audit found $7.85 million. Total cost with contrition payment reached $8.05 million, excluding legal costs, reputational damage and lost business value.

NAB’s pattern demonstrates how reactive approaches fail to resolve underlying issues. The bank spent $250 million remediating underpayments from 2012 to 2022. Three years later, it announced another $130 million remediation programme, suggesting the previous investment failed to fix fundamental problems.

Fair Work Ombudsman treatment of self-reporting

The Fair Work Ombudsman Payroll Remediation Program Guide released in May 2025 establishes clear expectations.

Self-reporting isn’t mandated in the Fair Work Act, but the FWO recommends that employers who identify broad or systemic non-compliance report at an early stage, even if all issues haven’t been identified.

Timing determines the value of self-reporting. If the FWO becomes aware of potential non-compliance through other channels before the employer notifies them, and absent a satisfactory explanation for timing, the employer’s subsequent notification generally won’t be treated as early or voluntary self-report.

The FWO expects employers who self-report to enter into court enforceable undertakings as a minimum and immediately pay back money plus interest owed to workers. The FWO also expects payment for ongoing independent audits of payroll with FWO oversight.

Criminal safe harbour provides the strongest incentive for early self-reporting. Organisations that report before investigation commences can access protection from criminal prosecution.

The cooperation credit from self-reporting translates to more favourable enforcement outcomes. Organisations may avoid litigation entirely, negotiate less onerous enforceable undertaking terms, and receive reduced penalties if matters proceed to court.

Payroll Remediation Timeframes and Costs

Small-scale remediation

Small remediation projects covering isolated issues resolve within three to six months from discovery to final payment.

Organisations with fewer than 100 affected employees under a single award or enterprise agreement typically complete remediation relatively quickly. The timeline assumes adequate historical records, clear identification of the error and straightforward calculation methodology.

Simple classification errors or penalty rate miscalculations affecting a limited cohort present fewer variables to analyse. When the organisation can quickly determine what should have been paid versus what was actually paid, calculations proceed efficiently.

Former employees add complexity even in small-scale remediations. Locating people who no longer work for the organisation requires multi-channel outreach and extends timelines regardless of the number of people affected.

Medium complexity remediation

Medium-scale remediations affecting hundreds of employees across multiple awards or enterprise agreements extend to 12 to 18 months.

Multiple industrial instruments create interpretation challenges that require expert input and consultation with unions. Each award brings its own complexity around classifications, penalty rates, allowances and loading calculations.

Incomplete historical records compound the timeline. When timesheets or rosters are missing for some periods, organisations must reconstruct likely work patterns or apply Fair Work Ombudsman guidance to give employees the benefit of the doubt. This reconstruction requires substantially more analysis than simple data extraction.

System configuration issues affecting multiple employee cohorts require detailed investigation into when errors began, which system changes introduced problems, and how those problems manifested differently across various groups.

Large-scale, complex remediation

Large remediations affecting thousands of employees across multiple years and industrial instruments require two to five years or more from discovery to completion.

Woolworths discovered underpayments in October 2019 and made interim payments by December 2019. Full remediation continued through 2023, more than four years later. The company reviewed 11 million individual records per year across all Australian businesses.

Discovery of additional underpayments during remediation drives timeline expansion. What appears as a contained issue affecting one business unit reveals systemic problems across the organisation. Woolworths initially estimated $200-300 million, which grew to $750 million as the review uncovered issues in logistics, Dan Murphy’s, BWS and Big W beyond the original supermarket focus.

Multiple system migrations over the review period create technical challenges. Data stored in legacy systems requires extraction, transformation and validation before analysis can begin. System configuration history becomes difficult to reconstruct when multiple platforms operated during different timeframes.

Former employee populations in large organisations number in the thousands. Taking all reasonable steps to locate and pay people who worked for the organisation years earlier requires sustained effort across multiple communication channels.

Federal Court proceedings add years to timelines when enforcement action results. Woolworths faced proceedings beginning in mid-2023, four years after initial discovery, focusing on calculation methodology and offset treatment.

Hidden costs of reactive remediation

The actual underpayment amount represents only one component of total remediation cost.

Superannuation Guarantee Charge substantially exceeds normal superannuation obligations. A real example from HLB Mann Judd demonstrated a company with 13 employees owing $37,250 in late superannuation. Paying on time would have cost net $26,075 after the 30% tax deduction. The SGC totalled $42,405, with lost tax deduction of $11,175 and compliance costs of $5,000, for total $58,580. Being late cost an additional $32,505, or 87% more than paying correctly.

The SGC includes the shortfall plus 10% nominal interest per annum calculated from the first day of the quarter until lodgement, plus $20 administration fee per employee per quarter. The nominal interest cannot be reduced or waived by the ATO. Most critically, SGC is not tax deductible.

Interest on back wages compounds over multiple years. Whilst not legally required, the Fair Work Ombudsman expects interest as best practice. Organisations calculating remediation over six years apply interest that can reach 20 to 30% of the principal underpayment amount.

Tax complications require ATO guidance and potentially amendments to employee tax returns for multiple years. Professional fees for tax advice add to remediation costs.

Board and executive time represents substantial opportunity cost. Crisis management diverts CEO, CFO and CHRO attention from strategic priorities for months or years. Board meetings focus on remediation status rather than business performance.

Reputational damage affects recruitment, customer relationships and investor confidence. ASX-listed companies typically see share price declines following underpayment announcements. Brand damage in consumer-facing businesses translates directly to reduced revenue.

Enforceable undertakings published on the Fair Work Ombudsman website remain visible indefinitely. Ongoing independent audits required under these undertakings continue for three or more years at employer expense.

Employee morale and trust decline during remediation. Staff distrust payroll processes, question whether they’re being paid correctly, and may leave for employers perceived as more reliable. Turnover costs compound remediation expenses.

Common Pitfalls and How to Avoid Them

Mistakes in proactive audits

Limiting scope too narrowly produces false confidence. Reviewing only the last 12 months when issues extend back years leaves substantial liability unidentified. Focusing on a single business unit when problems exist enterprise-wide provides incomplete risk assessment.

Using the same advisers who configured systems incorrectly or missed issues during previous audits perpetuates problems. Organisations engage Big Four firms that implemented faulty systems to audit those same systems. The conflict of interest and lack of fresh perspective guarantee important issues remain hidden.

Excluding stakeholders during audit processes creates gaps. Payroll, HR, finance, legal and operations must all participate. Payroll teams understand day-to-day mechanics. HR knows employment arrangements. Finance sees cost patterns. Legal understands compliance obligations. Operations knows actual working arrangements. Excluding any group means missing critical context.

Checking calculations without examining processes identifies symptoms rather than causes. Technical systems audits verify that configurations produce mathematically correct outputs for given inputs. They don’t assess whether the inputs themselves are accurate or whether data quality issues corrupt results upstream.

One-time audit mentality fails to build ongoing compliance capability. Organisations treat audits as point-in-time exercises rather than establishing continuous monitoring. Issues resolved during the audit re-emerge months later when awards change or new enterprise agreements commence.

Creating discoverable evidence without legal privilege protection exposes organisations unnecessarily. Running audits through HR rather than legal counsel means findings become discoverable in subsequent litigation or Fair Work investigations. Proper structure involves legal counsel retaining auditors to maintain privilege.

Delaying remediation after identifying issues compounds liability. Finding underpayments but deferring repayment whilst seeking “perfect” calculations means ongoing contraventions continue. Fair Work Ombudsman expectations require immediate action to stop further underpayments, even if full historical calculations remain incomplete.

Not seeking second opinions on complex interpretations creates risk. Using a single adviser’s interpretation of ambiguous award provisions may seem efficient, but validating methodology through independent review catches errors before they propagate through calculations affecting thousands of employees.

Mistakes in reactive remediation

Failing to self-report early enough costs organisations criminal safe harbour protection. Waiting until investigation starts or media exposure occurs eliminates the primary benefit of voluntary disclosure. The Fair Work Ombudsman treats notifications after they become aware through other channels as involuntary, absent satisfactory explanation for timing.

Minimising scope when issues appear systemic creates false economies. Hoping problems are isolated to one cohort when patterns suggest broader issues means discovering additional underpayments after announcing completion of remediation. This pattern damages credibility and suggests either incompetence or deliberate concealment.

Incomplete disclosure to the Fair Work Ombudsman through drip-feeding information destroys trust. Revealing underpayments incrementally as the FWO asks questions rather than conducting comprehensive review and disclosing all findings transparently signals bad faith.

Not stopping ongoing underpayments immediately violates Fair Work Act obligations. Continuing to underpay employees whilst calculating historical amounts constitutes serious contraventions. Interim payment adjustments must commence even before precise calculations are complete.

Poor employee communication timing creates unnecessary problems. Communicating too early without facts generates anxiety and questions the organisation can’t answer. Waiting too long before informing affected employees destroys trust and suggests concealment. The balance requires communicating once the organisation understands the issue scope and has a remediation plan, even if all details remain unresolved.

Engaging generalist advisers rather than payroll compliance specialists wastes time and money. Using advisers who don’t specialise in Australian award interpretation and payroll systems means redoing work when their methodology proves inadequate or their interpretations wrong.

Taking adversarial approaches with the Fair Work Ombudsman escalates enforcement action. Fighting rather than cooperating converts matters that might resolve through enforceable undertakings into litigation. Cooperation doesn’t mean accepting incorrect FWO positions, but it does mean engaging constructively and transparently.

Not preserving legal privilege makes everything discoverable. Having HR manage remediation rather than legal counsel running the process with HR input means losing privilege protection for audit findings, legal advice and remediation strategy.

Underestimating reputational impact leads to inadequate communications strategy. Not having prepared responses for media, employees, customers and investors when news breaks creates confused messaging that amplifies damage.

Assuming insurance covers costs creates budget shortfalls. Directors and Officers insurance and Employment Practices Liability Insurance typically exclude wage underpayments as ordinary business obligations that should have been paid. Organisations budget for remediation expecting insurance reimbursement that never arrives.

Red flags CFOs and CHROs should watch for

Pay run duration increasing over time suggests growing complexity or workarounds for system limitations. Payroll teams spending progressively more time on each pay cycle indicates processes breaking down or manual interventions increasing.

Rising complaint volumes about pay errors signal systematic problems. One or two queries per pay period represents normal variation. Ten or twenty complaints suggests patterns worth investigating.

Payroll team turnover accelerating indicates stress, inadequate support or recognition that problems exist without solutions. Experienced payroll staff leaving signals dysfunction.

System upgrade or enterprise agreement implementation projects running behind schedule or over budget often hide payroll rule clarification problems. Delays in answering vendor configuration questions suggest organisations haven’t agreed on award interpretations.

Total payroll costs declining whilst headcount remains stable or increases warrants investigation. Lower costs might indicate efficiency improvements, but they might also mean underpayment of entitlements.

Audit findings from other compliance areas revealing payroll issues suggest broader problems. Workers compensation audits, superannuation reviews or Fair Work investigations into unrelated matters sometimes expose payroll non-compliance.

“We’ve always done it this way” responses to questions about payroll practices indicate processes based on historical precedent rather than current obligations. Awards and agreements change, making historical practices potentially non-compliant.

Inability to quickly explain specific payroll calculations signals poor documentation. If payroll managers can’t clearly articulate why an employee received a particular amount, the organisation probably lacks documented rules.

Resistance to external review from payroll teams sometimes indicates awareness of problems they don’t want exposed. Defensiveness about processes or calculations suggests issues worth investigating.

Excel-based payroll rule documentation with thousands of rows maintained by multiple people creates inevitable inconsistency. This structure guarantees underpayments eventually emerge.

When to Engage Payroll Remediation Specialists

Internal vs external capability assessment

Most organisations lack internal capability to manage significant payroll remediation programmes.

Internal payroll teams operate at capacity managing day-to-day pay runs, responding to employee queries and handling routine compliance updates. Adding a major remediation project whilst maintaining business-as-usual operations isn’t feasible.

Award interpretation expertise rarely exists internally at the depth required for remediation. Payroll managers understand how to apply their organisation’s current processes, but they may not have the breadth of experience across multiple industries and awards to validate whether those processes comply with obligations.

Forensic payroll analysis requires different skills than operational payroll management. Reconstructing historical pay calculations, working with incomplete data and applying Fair Work Ombudsman guidance on burden of proof represent specialist capabilities.

Legal and regulatory navigation benefits from external experience. Specialists who regularly interact with the Fair Work Ombudsman understand enforcement priorities, negotiation approaches and what constitutes adequate remediation methodology.

Independence provides credibility. The Fair Work Ombudsman and courts view external expert validation of calculations and methodology more favourably than internal attestations. Organisations telling the FWO they’ve reviewed themselves and found everything acceptable carries limited weight.

Specialist payroll consultants vs Big Four firms

The choice between specialist payroll consultants and Big Four firms affects outcomes substantially.

Big Four business models rely on junior consultants performing volume work under partner supervision. Graduates with two years of experience analyse payroll data and conduct calculations. These consultants are intelligent and capable, but they lack pattern recognition from decades of payroll experience.

Partners managing 20 simultaneous projects can’t review nuance and detail in each engagement. Their hourly rates make hands-on data analysis uneconomical. The model works for many services but struggles with payroll compliance, where subtle errors in large datasets require experienced review.

Scope limitations constrain Big Four effectiveness. Junior consultants stay within defined project boundaries and miss obvious issues outside those scopes. Someone with extensive payroll experience would recognise peripheral problems, but junior staff lack context to identify them.

Conflicts of interest emerge when firms that implemented systems audit those same systems. Big Four firms that configured payroll systems during implementation projects lack incentive to identify their own configuration errors. Fresh perspective from firms that didn’t build the systems produces more comprehensive findings.

Specialist payroll consulting firms structure delivery differently. Experienced practitioners with 15 to 20 years in payroll perform actual analysis rather than supervising junior staff. They’ve seen payroll failures across multiple organisations and recognise patterns that indicate broader issues.

Specialists focus exclusively on payroll compliance rather than spreading attention across multiple service lines. This depth of focus produces insights that generalists miss.

Cost structures differ between specialists and Big Four firms, though the right choice depends on capability rather than price. Paying less for inadequate analysis costs more when missed issues surface later, require additional remediation, and escalate Fair Work Ombudsman enforcement action.

What to look for in a remediation partner

Demonstrated payroll expertise across Australian awards and enterprise agreements indicates capability. Partners should have senior practitioners who’ve worked on major remediations and understand complex instruments like SCHADS, Clerks and Hospitality awards.

Fair Work Ombudsman experience matters significantly. Firms that regularly negotiate with the FWO understand what constitutes adequate methodology, communication and documentation. They know enforcement priorities and can anticipate FWO requirements.

System expertise across major platforms allows partners to investigate configuration issues effectively. Understanding how Workday, ADP, Dayforce, UKG, Employment Hero, Deputy, Humanforce and other platforms translate award rules into calculations helps identify where errors originate.

Forensic capability for historical analysis distinguishes remediation specialists from operational consultants. Working with incomplete records, reconstructing likely scenarios and applying burden of proof guidance require specific skills.

Independence from system implementation prevents conflicts. Partners who didn’t configure the systems under review provide unbiased assessment of configuration accuracy.

Legal privilege understanding ensures work remains protected. Partners who structure engagements to maintain legal professional privilege prevent their findings from becoming discoverable in subsequent litigation.

Clear methodology documentation demonstrates rigour. Partners should articulate how they’ll approach calculations, handle missing data, treat overpayments and validate results.

Reference cases in similar industries and scales indicate relevant experience. Partners who’ve managed remediations in comparable organisations understand the specific challenges your organisation faces.

Cultural fit affects working relationships during stressful projects. Remediation programmes operate under time pressure with significant stakes. Partners who communicate clearly, escalate issues appropriately and collaborate effectively with internal teams produce better outcomes.

Conclusion

Payroll remediation programmes that appear manageable during discovery routinely expand into multi-year projects costing tens or hundreds of millions of dollars.

The pattern repeats across Woolworths, NAB, University of Melbourne, Qantas and Australia Post. Initial estimates increase as reviews uncover systemic issues beyond the original scope. Timelines extend as organisations discover additional underpayments whilst calculating historical amounts. Costs multiply through superannuation guarantee charges, interest, legal fees, court penalties and reputational damage.

Root causes remain consistent. Organisations lack documented payroll rules, configure systems incorrectly, fail to maintain configurations when awards change, and rely on junior consultants who miss nuanced compliance issues. These foundational problems multiply through every downstream process.

Criminal wage theft provisions that commenced on 1 January 2025 changed the risk profile substantially. Intentional underpayments now carry up to 10 years imprisonment for individuals and penalties exceeding $7 million for corporations. Directors face personal liability under Section 550 accessorial provisions regardless of whether they took reasonable steps to prevent underpayments.

Proactive identification provides the only reliable protection. Self-reporting before Fair Work Ombudsman investigation commences offers safe harbour from criminal prosecution, reduced penalties, control over narrative and timeline, and avoidance of enforceable undertakings that remain on the FWO website indefinitely.

The foundational requirement remains clear, documented payroll rules that answer “when X happens, we do Y” for every scenario. Without this foundation, system configurations perpetuate errors, calculations produce incorrect results, and organisations accumulate liability with every pay run.

Work With Payroll Experts

Payroll Experts helps Australian organisations prevent underpayments through proactive compliance audits and payroll rule documentation.

Our senior practitioners bring 15 to 20 years of experience working across Australian awards, enterprise agreements and major payroll platforms. We’ve seen the patterns that indicate systemic issues and understand how to negotiate with the Fair Work Ombudsman.

We structure engagements to maintain legal professional privilege, work independently from system implementations to avoid conflicts, and focus exclusively on payroll compliance rather than spreading attention across multiple service lines.

Contact us to discuss how we can help your organisation identify and address payroll compliance risks before they escalate to remediation programmes.