Your Essential Guide to Payroll Compliance

Payroll compliance is a big responsibility for any business owner or leader. Many people in business strive for growth. However, scaling up usually comes with hiring more employees and taking on more compliance risk.

Payroll legislation also changes over time and there can be significant consequences for not following it. That’s why the task of paying your employees has to be dealt with proactively throughout your growth journey. Your compliance strategy can also help you build trust with your team and strengthen your employer brand.  

Why you need to focus on payroll compliance

Australia has strict workplace laws and payroll compliance failures can have far reaching consequences for employers of all sizes. Imagine how finding an underpayment too late could impact your businesses cashflow. Just as importantly, underpayments cause stress for employees, who expect to receive the correct entitlements for their contributions. 

New wage theft laws were also introduced in Australia in January 2025, making intentional underpayment of wages by employers a criminal offence. Wage theft incidences are often reported in the media too, and could create negative fallout between your business, the public, employees, stakeholders, and customers if they happen to you. 

So, how can you stop errors before they occur? Payroll compliance must become embedded in your organisational culture, systems, and processes. One of the biggest misconceptions about payroll is that you can just press a few buttons to pay employees correctly. In reality, even large organisations still struggle to meet their obligations and get pay right every single pay run. Complex awards and enterprise agreements, manual processes, and disconnected systems make maintaining and proving compliance a challenge.  

Small, nuanced errors are also one of the biggest causes of underpayments. Left unnoticed, underpayments can become huge liabilities over time. One off audits aren’t enough and continuous monitoring is vital. So, let's explore some of the ways you can strengthen your compliance strategy and use payroll software to catch discrepancies in near real-time.

Understanding payroll compliance

Payroll is not just about issuing payments to employees. It’s a dynamic process that involves responding to changes in state and federal legislation, making accurate tax and entitlement calculations, and maintaining comprehensive records for auditing and business reporting. 

What Is Payroll Compliance?

Payroll compliance involves meeting your legal obligations as an employer. It’s about abiding by the practices and regulations that define how your employees should be paid.  

Your employees should receive at least the minimum wage that they are entitled to according to the law. The Fair Work Act 2009 also continuously updates as social expectations and pressures change, and it’s your duty as an employer to stay aware of new requirements.  

Payroll compliance is a process that requires constant attention as changes in tax rates, legislation, minimum wage requirements, and company policy often occur. To avoid penalties, you have to be able to update your payroll systems and procedures regularly.  

Building a culture of compliance is important too, as employers that are found to be intentionally underpaying their employees can be investigated by Fair Work and criminal prosecution can result in monetary fines, prison time, or both. 

Payroll professionals play a huge role in monitoring this continuous process.

Compliance requirements for payroll

The major compliance requirements for payroll in Australia include paying employees at least their minimum pay rates and entitlements, paying employees their superannuation entitlements under the superannuation guarantee, conducting Single Touch Payroll (STP), and reporting on payroll tax.

Minimum pay rates and entitlements

Minimum wages refer to the minimum amount an employee can be paid for the work they do. This varies according to the awards applicable to different industries and occupations, as well as the employee’s age, type of employment, and other contractual conditions. It is vital that wages (including overtime and penalty rates as well as leave entitlements) are calculated accurately. 

Superannuation guarantee 

The national superannuation guarantee (SG), is a percentage of an employees’ ordinary time earnings that must be paid to their nominated superannuation accounts on, or before specified payment dates.

Single Touch Payroll (STP)

Single Touch Payroll is an initiative by the Australian Government that streamlines employer reporting to government agencies. It requires timely record-keeping and STP-enabled software as businesses of all sizes need to report on their employees’ payroll information every time they are paid.

Payroll tax 

Payroll tax is levied on wages paid or payable by an employer to its employees when the threshold amount applicable to their state or territory is exceeded. These tax submissions need to be made on time and there are maximum deduction entitlements that vary based on the employer’s location. 

Strategies for streamlining payroll compliance

Payroll discrepancies stem from a number of underlying issues, which you can target with your compliance strategies.

Common payroll compliance mistakes

Below are some of the most common errors regarding payroll and compliance, along with ways to avoid them:

Incorrectly classifying employees 

Schedule regular employee classification audits to ensure that you accurately differentiate contractors from full-time, part-time, and casual staff. 

Making inaccurate payments for overtime and penalty rates 

Regularly check that you are paying the correct rates according to the relevant awards and agreements. You can also use automated payroll systems to calculate and apply these accurately. 

Faulty record-keeping 

Inaccurate records lead to incorrect payments, which can lead to employee grievances and costly legal action. To help prevent errors, it is best to move away from manual record-keeping and instead implement automated systems. 

Mismanaging payroll tax

Inaccurate reporting or missing tax payment deadlines can carry severe financial consequences. Using payroll software, you can estimate your payroll tax based on your payroll activity data.

Being unaware of payroll-related laws

Being unaware of payroll-related laws and regulations (or changes to them) does not protect you from financial penalties and legal risks. You must keep your payroll practices in tune with these laws and make necessary updates immediately.

Incorrect award or enterprise agreement application

Australia’s award system is highly complex and misinterpretation can lead to costly payroll errors. Seek professional HR advice to help you avoid misclassifying workers, applying the wrong awards, or relying on outdated enterprise agreements.

Missing time and attendance data

Having gaps in your records makes it hard to prove that pay is correct. Make sure you are systematically tracking time, attendance, and breaks for all of your employees.

Incorrect system configurations 

Payroll variances can occur when businesses misinterpret awards or payroll systems contain configuration errors, leading to incorrect pay calculations. If an error occurs in the sharing of data between systems and integrations, then your pay calculations can be thrown out.

Using technology to become more compliant 

You might be starting to think that it’s too hard to keep up with all of these obligations. However, you can use adaptable workforce management and payroll technology, like foundU, to reduce the administrative burden and boost your compliance capabilities. 

Some of the helpful functionalities to look for include: 

Position creation

Using foundU, you can set up employee profiles with multiple positions assigned to each one. This means the system can reference the correct award rates and pay rules that need to be applied for approved shifts.

Automated calculations

Your payroll software should automate pay rate, deduction, and allowance calculations in line with the relevant awards and enterprise bargaining agreements. When legislation changes, you should be able to update the applicable rates and be assisted by a responsive support team where required.

Seamless minimum wage increases

With foundU, you can easily schedule rate increases, ensuring the correct wage is paid when new requirements kick in. This can be particularly helpful during end of financial year when awards are often updated.

Testing features that help you find discrepancies early

foundU's payroll variance report, helps you slice and dice your payroll data to find discrepancies between time periods. Variances are clearly highlighted in red and there are a variety of search refinement filters. If you need to investigate further, there are also quick links to associated pay slips and a powerful award test tool that helps you see how pay rules are being applied.  

An export from the award test tool will also help you compare multiple employee breakdowns, conduct side-by-side payroll comparisons, run Better Off Overall Tests (BOOT) for employees, and review extended periods of employee leave taken on one page in excel.  

foundU's rostering system also triggers live compliance alerts for items like overtime, fatigue warnings, and minimum hours so that you can reduce the occurrence of breaches while creating your schedules.

Seamless data sharing

Since foundU has onboarding, rostering, time and attendance, leave management, and payroll features built into one platform, your workforce management data is shared seamlessly. This helps to prevent missing data or configuration errors that can occur when you’re sharing information across multiple systems.

How to check if you are paying your team correctly

There are a number of ways you can continuously check that you’re getting pay right.  

• First and foremost, make sure that you’re using the current award conditions and minimum wages. These do get updated regularly and you should check Fair Work to make sure the rules being used in your payroll system still align with the latest requirements.  

• If you’re using foundU, you can use our payroll variance report to look for variances between time periods. You can also filter your payroll data with filters like employment types and conditions, office codes, locations, pay slip conditions, and income types depending on the information you need to see.  

• If you find a variance, you can easily click through to our powerful award test calculator. This will show you what award settings are being used for the payment of your employees and how pay rules are being applied. Export your data if you need to dive deeper.  

• By reviewing your pay slips and adding pay items where necessary, you can also calculate superannuation and other entitlements that should be applied over particular time periods. 

• Regularly check your employee and time and attendance data to make sure that your system is using the correct information to calculate pay. Using foundU, you can set up automated employee document expiry notifications to make sure that you have the right certificates, qualifications, and licenses for all of your staff. 

• You can also seek our HR advice to check that you are applying the right awards and interpreting them correctly.

Fostering a culture of compliance

Ultimately, you need to foster a culture of compliance. Your team needs to view payroll as a dynamic process that should be handled proactively, rather than a repetitive and unchanging task. 

By educating your team, seeking professional HR advice where needed, conducting regular reviews, and selecting an adaptable and compliant payroll system, it’s easier to avoid errors. Select compliance champions within your business who are responsible for making sure procedures are followed and educating others on changing legislation. You can also use technology as an enabler and a safeguard, helping you to identify errors before they snowball into major compliance breaches.

Improve your payroll compliance strategy with foundU

If you want to make payroll compliance a priority in your business, then book a demo of foundU. We can show you how having all of your workforce management and payroll data combined in one adaptable system will transform your approach to compliance.