Australian employers have another reminder to check their payroll systems after the Fair Work Ombudsman reported recovering $453 million in unpaid wages and entitlements for more than 181,000 workers during 2025–26.
The amount recovered was around $95 million higher than the previous financial year, an increase of 27%. Fair Work also reported that cumulative back-payments over the past six financial years were almost $2.5 billion.
The figures cover workplaces across Australia and should not be taken to mean that small businesses were responsible for all of these underpayments. However, they highlight why employers should regularly review wages, award classifications, allowances, overtime, leave and payroll records.
For businesses in Newcastle, Maitland and across the Hunter Region, a payroll review can be particularly worthwhile following several workplace changes that took effect from 1 July 2026.
Key payroll checks for employers
1. Check that current pay rates are being used
Minimum wages changed from 1 July 2026.
The National Minimum Wage is now $26.44 per hour or $1,004.90 per week for employees who are not covered by an award or registered agreement.
Minimum award wages also increased from 1 July 2026, with most award rates increasing by 4.75%. The new rates generally apply from the first full pay period starting on or after 1 July.
Employers should make sure their payroll software was updated correctly rather than assuming the change occurred automatically.
2. Review award classifications
Paying the correct headline hourly rate is only part of payroll compliance.
Employees must also be classified correctly under any applicable modern award or enterprise agreement. A change in an employee’s duties or responsibilities can sometimes mean their classification needs to change.
Fair Work’s pay guides include minimum rates, common penalty rates and monetary allowances for employees covered by modern awards.
Review classifications when employees are promoted, change duties or take on additional responsibilities.
3. Check overtime, penalties and allowances
Underpayments can occur when ordinary hourly rates are correct but other entitlements are missed.
Depending on the employee and applicable award, this can include:
- overtime
- weekend or public holiday penalties
- shift allowances
- meal allowances
- travel-related payments
- casual loading
- other award-specific entitlements.
Do not rely only on an employee’s base rate when checking whether payroll is correct.
4. Reconcile timesheets against payroll
Compare employees’ actual hours with what was processed through payroll.
For businesses using rostering, time-tracking and payroll software, check that the systems are communicating correctly. Pay particular attention to early starts, late finishes, overtime, unpaid breaks and work performed outside normal rostered hours.
Small differences can become significant when they occur repeatedly across many employees and pay periods.
5. Review payslips and payroll records
Employers must provide employees with a payslip within one working day of being paid.
They must also maintain accurate employee records, including relevant pay and employment information. Fair Work requires employee records to generally be retained for seven years.
Good records can also make it easier to identify and correct problems if questions arise later.
6. Correct errors when they are found
If a payroll review identifies an underpayment, ignoring it can make the situation worse.
Fair Work encourages employers to identify the amount owing, correct payroll settings and repay affected employees where required.
For small business employers, the Voluntary Small Business Wage Compliance Code is also relevant. Since 1 January 2025, intentionally underpaying employee wages or entitlements can be a criminal offence.
Fair Work states that genuine mistakes are different from intentional underpayments. When considering the Code, factors can include whether an employer made reasonable efforts to determine correct entitlements, sought reliable advice, corrected mistakes and took steps to prevent them happening again.
7. Schedule regular payroll reviews
Payroll should not be treated as a system that can be configured once and forgotten.
Rates, awards, employee duties and workplace laws can change over time.
Consider reviewing payroll:
- after annual wage changes
- when an employee changes duties
- when new staff are hired
- when payroll software is changed
- when an award is updated
- after identifying any payroll discrepancy
- as part of a regular quarterly or annual compliance review.
What this means for your business
The latest Fair Work recovery figures are a useful reminder that payroll errors can become expensive if they continue unnoticed.
For small and medium businesses, a practical payroll review does not need to begin with a complex investigation. Start by selecting several recent pay periods and comparing employee classifications, timesheets, pay rates, allowances and payslips against the applicable workplace requirements.
Businesses should also make sure payroll records match their accounting records and that any corrections are properly documented.
For Newcastle, Maitland and Hunter Region employers, Bottrell Accounting can assist with payroll processing, bookkeeping and accounts support, and broader business advisory services.
Need help reviewing your payroll processes?
Speak with the Bottrell Accounting team if you need assistance reviewing payroll records, reconciling employee payments or improving your ongoing payroll and bookkeeping processes.
This article provides general information only and does not constitute legal, employment, tax or financial advice. Awards and employment conditions vary between workplaces and employees. Employers should confirm the requirements that apply to their circumstances and obtain appropriate professional or workplace relations advice where required.
