The Importance of Regular HR and Payroll Audits

Compliance with Fair Work and employment legislation is a fundamental responsibility for all Australian businesses. Employers must ensure that workers receive their lawful entitlements, as failure to do so can result in significant financial penalties and reputational damage. As of January 1, 2025, Fair Work has legislated that intentional underpayment of wages or entitlements can constitute a criminal offence. Additionally, the Fair Work Ombudsman (FWO) has expanded its capacity to conduct industry-wide inspections. Recent enforcement actions highlight the necessity of regular HR and payroll audits to mitigate non-compliance risks.

Why Regular Audits Are Essential

Conducting routine HR and payroll audits is critical to ensuring:

• Employment contracts align with current legislation and industry awards.
• Pay rates meet or exceed the applicable minimum wage and entitlements.
• Employees receive accurate pay slips and entitlements, reducing legal exposure.
• Businesses maintain proper documentation, including Fair Work Information Statements.

Without proactive compliance measures, businesses risk breaching Fair Work obligations, as evidenced by recent legal actions taken by the FWO.

See 3 Case Studies Below: The Cost of Non-Compliance

1. Penalties for Underpayment at United Petroleum-Branded Outlets

The FWO secured $179,221 in penalties against KLM Foods Pty Ltd, which operated United Petroleum-branded outlets in Tasmania. The company underpaid four migrant workers a total of $20,230 over two months and issued false pay slips.

Key Takeaway: Employers must accurately record employee working hours and ensure correct pay rates, particularly for vulnerable migrant workers.

2. Legal Action Against Hairdressing Salon Operators

Hair & Co Pty Ltd, which operates hair salons in Western Sydney, is facing legal action for allegedly failing to comply with a Fair Work Commission order to compensate an unfairly dismissed teenage worker. This case highlights the legal consequences of disregarding Fair Work rulings.

Key Takeaway: Employers must adhere to Fair Work Commission orders and ensure all dismissal procedures comply with employment laws.

3. FWO and Home Affairs Inspections in Melbourne

The FWO and Australian Border Force recently conducted surprise inspections of 40 businesses in Melbourne, particularly within the food sector. These inspections focused on verifying time and wage records and ensuring Fair Work compliance. Additionally, Port Melbourne Cosmetic Clinic Pty Ltd is facing legal action for allegedly providing an employee with a false pay slip and failing to back-pay entitlements.

Key Takeaway: Businesses should conduct internal audits to verify payroll accuracy before external inspections uncover potential breaches.

Proactive steps that must be taken for all Employers

To avoid costly non-compliance consequences, businesses should:

1. Conduct regular HR and payroll audits to identify discrepancies in pay rates, entitlements, and record-keeping.
2. Stay updated on employment legislation to ensure contracts and policies align with Fair Work requirements.
3. Implement training programs for HR and payroll staff on wage calculations and compliance obligations.
4. Respond promptly to compliance notices from regulatory authorities to prevent escalation to legal proceedings.

Conclusion

Failure to meet Fair Work obligations can lead to severe financial penalties and reputational harm. By committing to regular HR and payroll audits, businesses can safeguard themselves against legal action while fostering a compliant and ethical workplace.

Key Business Advisors can support your organisation by conducting comprehensive HR and payroll audits, ensuring your business remains proactive in compliance efforts. Contact us today to learn how we can help secure your compliance and protect your business.

At Key Business Advisors, we are a family business ourselves, and we have built an incredible team committed to delivering results aligned with our mission, vision, purpose, and values. We create tailored strategies to help businesses go from good to great. With a proven model and over 17 years of experience, we have built strong, lasting client relationships across Australia.

To learn more about our company and to access some valuable information to help your family business grow, change and get to the next level, check out the following FREE Resources:

• Learn more about Key Business Advisors – keyba.com.au
• Implement HR Best Practice – https://keyba.com.au/hr-documents-checklist
  • Free Download of Payroll Tips for Small Business Owners
  • Free Download of HR Health Check
  • Free Download of HR Best Practice

If you are concerned or need help with your payroll or Award conditions, why not give us a call?

Let us help you to enhance the performance and culture of your business. Don’t hesitate to contact Key Business Advisors on 1300 4 ADVICE today!