Wage Compliance
Ensure you’re meeting your obligations as an employer
Wage Compliance for Australian Small Business
When did you last check your payroll matches the applicable modern award?
Wage Theft is now a criminal offence. Now is the time to act.
“More than $1.2 billion is syphoned out of workers’ pay packets each year in unpaid or underpaid wages and around $1.1 billion in underpayment of superannuation. “
The Bill does not introduce the concept of recklessness, as the stated intent is not to capture employers who act honestly. Employers who are aware of entitlements owing to their employees, but who fail to provide the entitlements, would be exposed under the provisions.
WHAT YOU NEED TO KNOW
- Wage theft is a criminal offence in Queensland punishable by up to 10 years in prison for ‘stealing’ and a maximum of 14 years in jail for an offence of fraud.
- Workers, or a Union on behalf of a worker, can initiate the process by making a complaint to Queensland Police.
- The process involves conciliation for cases up to $20,000.
- Workers, or a Union on behalf of a worker, can initiate a civil claim instead, through a new Industrial Magistrates Court if they choose.
WHAT YOU NEED TO DO
- Now more than ever, employers need to get pays right. This means:
- Ensuring your staff are being paid correctly under the relevant Modern Award or enterprise agreement, keeping in mind recent changes to Award minimum rates of pay and conditions
- Be sure to factor in allowances, overtime and other relevant award or enterprise agreement entitlements to ensure you are paying pursuant to an award or enterprise agreement
The Bill does not introduce the concept of recklessness, as the stated intent is not to capture employers who act honestly. So as an employer we strongly advise you to look at your payments NOW and act honestly by amending any underpayments and getting it right going forward.
What can we do to help?
Due to the complexity of modern industrial obligations payroll errors are made and frequently. Most underpayments are a result of administrative error, a misunderstanding of the payments required in the Modern Awards, outdated contracts and payments and/or a shortcoming in the payroll system, rather than any deliberate attempt to underpay employees.
If you are concerned that there might be errors in your processes Fresh HR Insights is here to help with our two options for a payroll audit.
How is BOOT testing different from Annualised Salary requirements?
Wage compliance is not always about the rate of pay we use to remunerate our employees. The concept of Better Off Overall Testing is not new but the introduction of Annualised Salary arrangements is relatively recent.
A BOOT test involves assessing an agreement to ensure that the terms within that agreement provide better entitlements than the relevant award. An employer may decide to pay their employees a rate of pay that is in excess of that required under the award. Some terms within the award may be incorporated within the rate of pay and not calculated separately.
A BOOT test may involve the employer testing to ensure that the employee is better off with the terms of the agreement, that may include a higher rate of pay, than the terms of the relevant award which uses a lower rate of pay and the payment of additional entitlements.
An Annualised Salary Arrangement is one where the employer agrees to pay their employees an annual salary which is greater than the minimum wage under the award.
Annualised Salary requirements seek to ensure that employers keep appropriate records for employees and regularly check that an employee has been paid in accordance with the arrangement.
The most common areas to be included and monitored in these arrangements are:
- Total hours worked including start and finish times
- Recording of paid and unpaid breaks
- Regular checks per pay period of outer limits to be applied and payment of excess if required
- Annual reconciliations to ensure the employee has been paid in excess of the minimum under the award
The Fair Work Commission regularly reviews and updates Modern Awards with new rules for Annualised Salary Arrangements.
If you need help navigating the complex requirements for BOOT Testing or an Annualised Salary arrangement we can help. Just click on the make an appointment button below or review our wage compliance packages.
Wage compliance services available
Wage & Award Sprint — A Small Business Award Compliance Check For One Employee.
The Wage & Award Sprint is a small-business award-compliance check for one employee — done properly, signed in writing, and built around the legal precision Fair Work expects. Wage theft is now a criminal offence in Australia. Most underpayments aren’t deliberate — they happen because the wrong award was applied, or the right award was applied with the wrong classification, or the salary set-off clause didn’t actually do what the owner thought it did.
The Wage & Award Sprint takes one employee and runs a proper Better Off Overall Test on them. You’ll know — in writing, signed and dated — whether you’re paying correctly under the right modern award and classification.
Every small business award compliance check includes:
- A confirmed modern award and classification level for the chosen employee.
- A single-employee BOOT analysis (estimated week).
- A written advice note, signed and dated for your small business award compliance check.
- A 30-minute Zoom to walk through the findings and the fix (if any is needed).
- A $695 credit toward your first month if you decide you want a full payroll compliance review.
Recommended for: any business that hasn’t checked an employee’s award and classification in the last 18 months, any business absorbing a new salaried hire, and any business worried about wage-theft exposure should consider our small business award compliance check.
Annual Salary Projection based on an average week
In this audit, we are calculating an estimated salary based on an average week. The award is reviewed to identify relevant penalties and allowances to ensure that you are paying all entitlements as due.
- Review award to identify relevant penalties and allowances
- Create audit calculations and provide a written explanation of calculations used
- One page per employee for sample week x 48 weeks plus 4 weeks annual leave
- Create an overview page linking to each employee tab for a one-page summary
Additional data required from you:
- Sample average weekly hours worked, preferably including the day of the week, start and finish times, (and confirmation of breaks taken) in order to identify applicable penalty rates.
The investment is $375.00 + GST per employee with a minimum payment for 10 employees ($3,750.00 + GST)
Full annual year review based last 12 months calculations
This audit goes into a far greater level of detail as we enter what has been worked every day for the previous 52 weeks, plus the daily award application for those hours worked. We then compare total due to total received.
We will identify as part of our audit additional information that is relevant to you to ensure you have all the facts. As an example, in previous reviews we have identified hours and or allowances such as working away allowances not entered on timesheets but paid. This is not uncommon. To address, in addition to reviewing hour entered on timesheets each week, we review the corresponding payment and amend the timesheet entries to match the hours paid.
Data required in addition to the above request would be:
- Timesheets for each week of the 52-week period being reviewed stating actual hours worked including day of the week and start and finish times (to identify relevant penalty rates if applicable).
- Detailed Payroll report for each of the 52 weeks including a breakdown per employee of hours processed and penalties and allowances paid for each of the 52 weeks provided.
As there is a far greater level of detail required the investment is $450.00 + GST per employee with a minimum payment for 10 employees ($4,500.00 + GST). This is an extremely detailed review that takes on average 1-2 hours per employee depending on the availability of reports and the information contained within the reports. The price reflects the time and depth required.
BOOT Testing
What is a BOOT Test?
A BOOT (Better Off Overall Test) compares what an employee is actually paid against what the relevant modern award would require, factoring in base rate, overtime, weekend and night penalties, allowances and superannuation. If you pay above-award rates or use an annualised salary intended to cover overtime and penalties, you need a BOOT to prove the rate genuinely leaves the employee better off overall.
The Fair Work Commission uses the BOOT to assess registered agreements against awards. As an employer, you use it to confirm your above-award rates and salary arrangements are doing what you believe they’re doing.
Without a BOOT, you carry underpayment risk you can’t see.
When you need a full 26-week BOOT review
A full BOOT review looks across 26 weeks of actual data for each employee being reviewed. It’s appropriate when:
- You have multiple employees on annualised salaries or above-award rates
- You’re testing a salary arrangement against a complex award with penalties, overtime and allowances
- You’ve had a Fair Work query or a payroll system change and need a robust, defensible review
- The salary is close to the award floor and small variations in hours week-to-week change the BOOT result
Data required:
- Timesheets for each of the 26 weeks under review, showing actual hours worked including day of the week and start/finish times (to identify relevant penalty rates).
- Detailed payroll reports for each of those 26 weeks, including a per-employee breakdown of hours, penalties and allowances paid.
- If the above isn’t available (e.g. a new starter or new role): anticipated weekly hours, expected overtime and outer limits, leave loading treatment, allowances to be included, and the industry and applicable award the employee will fall under.
Investment: $300 + GST per hour, with a minimum payment for 3 hours ($900 + GST). Typical 26-week BOOT reviews take 6–12 hours per employee, depending on complexity and the quality of the data provided. The price reflects the time and depth required.
The time scale to complete these audits takes between 7-30 days, depending on the complex requirements of your industry and company. We also offer updated employment contracts, and a discount will be applied following an audit. Pricing will be advised at the time of enquiry.
What risks can you face if you underpay your employees?
The landscape has changed significantly in the last 18 months. Underpaying employees — even unintentionally — now carries civil penalties roughly five times higher than they were in 2023, and since 1 January 2025, intentional underpayment is a criminal offence carrying up to 10 years’ imprisonment for individuals.
Civil penalties — for any underpayment, including honest mistakes. The Fair Work Ombudsman can investigate and bring court proceedings against employers, and affected employees or unions can also initiate proceedings. If a court finds you’ve underpaid an employee in contravention of the Fair Work Act 2009 (Cth), the current maximum civil penalties (per the Fair Work Ombudsman) are:
- Up to $495,000 per contravention for a body corporate, or three times the underpayment amount — whichever is greater.
- Up to $99,000 per contravention for an individual, or three times the underpayment amount.
- For serious contraventions (where the employer knew about the breach or was reckless as to whether it occurred), maximums rise to $4,950,000 for a body corporate and $990,000 for an individual — or three times the underpayment.
These figures apply even where the underpayment was inadvertent. The court will order the underpayment to be made up, with interest, in addition to any penalty.
Small business exception: the five-fold increase in civil penalties that took effect on 27 February 2024 does not apply to small business employers (14 or fewer employees) or to individuals. Small businesses face the pre-increase maximums (currently $93,900 per contravention, $469,500 for a serious contravention), but everything else applies — including back-pay and accessorial liability.
Criminal penalties — for intentional underpayment, from 1 January 2025. Under the new section 327A of the Fair Work Act:
- Individuals face up to 10 years’ imprisonment and fines up to $1.565 million (or three times the underpayment).
- Bodies corporate face fines up to $7.825 million (or three times the underpayment).
Importantly, honest mistakes and genuine errors are outside the criminal offence. The criminal provisions target conduct that is deliberate and results in underpayment. Small businesses that comply with the Voluntary Small Business Wage Compliance Code can be protected from criminal referral. This is exactly why proactively identifying and rectifying any underpayment is the strongest possible defence — voluntary disclosure puts you in a fundamentally different category to non-disclosure.
Accessorial liability — and this catches more people than you’d think. Under section 550 of the Fair Work Act, any person who is “involved in” a contravention can be held personally liable as an accessory. The Fair Work Ombudsman uses this provision against company directors, HR managers, payroll officers, bookkeepers and external accountants — and importantly, individuals cannot be indemnified by their employer for civil or criminal penalties. The penalty comes from their own pocket.
Two recent cases bring this to life:
In Fair Work Ombudsman v DTF World Square Pty Ltd (2023–2024), the General Manager was personally penalised $92,232 and the HR Coordinator was personally penalised $105,084 for being “knowingly concerned” in systemic underpayment, falsification of records, and threats made to visa-holding employees. The corporate respondents collectively faced penalties of $3.89 million.
In Fair Work Ombudsman v Ezy Accounting 123 Pty Ltd (2018) — still cited regularly today — an external accounting firm providing payroll services was found accessorially liable for its client’s underpayments. The firm was penalised $53,880 in addition to the employer’s $115,706 penalty. The firm argued its role was confined to entering data provided by the client. That argument did not succeed. The principle: advisers who are wilfully blind to underpayments can be on the hook personally.
And the Woolworths/Coles case has changed everything for salaried employees. In September 2025, the Federal Court ruled in Fair Work Ombudsman v Woolworths Group Limited; Coles Supermarkets Australia Pty Ltd [2025] FCA 1092 that contractual set-off clauses cannot offset above-award payments in one pay period against shortfalls in another. Employees must receive their full award entitlement each separate pay period. The two retailers face a combined remediation bill of around $1 billion, with penalties still to be determined in 2026. For any small business using an annualised salary intended to cover overtime, penalties and allowances, this ruling is the most important payroll decision of the decade — and it directly affects whether your salary set-off clause is doing what you think it is.
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