How Employers Can Get Wages Right in Australia and Minimise the Risk of Underpayments

With around 2.7 million businesses in Australia, and 36.4% of those employing staff, there is a high probability that some employers don’t know how to pay their staff correctly.

With multiple industrial instruments, including Modern Awards, EBA’s and the National Employment Standards, it’s no wonder employers may not have a full understanding of their obligations; it can be a messy landscape to work through.  Here are some tips to help you and your business.

Legal Framework

The Fair Work Act 2009 is the cornerstone of workplace law in Australia. It sets out the rights and obligations of employers and employees and establishes the functions of the Fair Work Commission and Fair Work Ombudsman. It provides the overarching framework for minimum standards, dispute resolution, and workplace relations.

Employers must comply with:

• Minimum employment standards
• Award or enterprise agreement obligations
• Record‑keeping and payslip rules
• Processes relating to termination, redundancy, and protections

Failure to comply not only breaches the law but exposes businesses to fines, litigation, and reputational harm.

Understand and Apply the National Employment Standards (NES)

The NES are 10 minimum entitlements that apply to all employees covered by the Fair Work Act. These include maximum weekly hours, leave entitlements, public holidays, and notice of termination.

Key examples include:

• 38-hour work week for full‑time staff, plus reasonable additional hours
• Four weeks of paid annual leave, plus an additional week
• 10 days of personal/carer’s leave
• Up to 12 months unpaid parental leave, with the right to ask for an extra 12 months of unpaid leave
• Notice of termination and redundancy pay

Incorrectly applying NES entitlements can lead to significant penalties and legal claims, so employers must embed these into contracts, rostering, payroll, and HR practices.

Check Which Modern Award Applies (If Any)

Most Australian employees are covered by a Modern Award, which sets out minimum pay and conditions on top of the NES.

These conditions include:

• Base rates of pay
• Penalty rates
• Overtime rules
• Allowances
• Breaks and roster requirements

Modern Awards are industry or occupation specific. Employers must ensure they:

• Identify the correct Award
• Classify employees correctly
• Apply wage rates and allowances accurately

Incorrect award coverage or classification is one of the most common causes of underpayment.

Pay the Correct Rates (Including Penalties, Overtime & Allowances)

Awards can be complex, and misinterpreting penalty rates, overtime rules, or allowances is a major contributor to underpayment cases.

Common employer mistakes include:

• Misclassifying employee levels or roles
• Failing to apply weekend, public holiday, or shift penalties
• Incorrect overtime calculations
• Omitting allowances such as travel, meal, or higher duties

Employers should check Award wage increases annually (usually announced by the Fair Work Commission at the end of each Financial Year) and regularly audit payroll systems to ensure they reflect the latest entitlements.

Maintain Accurate Timekeeping and Rostering Systems

To ensure correct wages, employers must record:

• Start and finish times
• Unpaid meal breaks
• Overtime worked
• Changes to rosters

Good timekeeping is essential for compliance with Award obligations and NES requirements, especially around maximum weekly hours and break entitlements.

Keep Legally Compliant Employment Records and Payslips

Under the Fair Work Act, employers must keep detailed employment records and issue compliant payslips. These records are essential in the event of an audit or employee claim.

Records must be:

• Accurate
• Accessible
• Retained for at least seven years

Payslips must include details like pay rate, hours worked (if applicable), superannuation, ABN, leave balances (if provided), and deductions.

Seek Professional Guidance When in Doubt

Given the complexity of workplace laws, many employers benefit from HR or legal advice, especially regarding:

• Award coverage
• Complex rostering
• Enterprise agreement interactions
• Underpayment reviews

Getting wages right is not optional; it’s a legal responsibility that protects both employees and your business. By understanding the Fair Work Act, NES, and Modern Awards, implementing accurate payroll practices, and staying informed about legislative changes, employers can reduce costly risks and build a compliant, ethical workplace culture.

If you’d like help reviewing your wage practices or ensuring Award compliance, one of our HR/Payroll experts would be more than happy to support you; simply give us a call on 1300 4 ADVICE