Wage theft reforms force payroll under the compliance microscope

Marcus Zeltzer, Yellow Canary founder, said the payroll compliance issue had become more of a ‘headline’ issue which had been exacerbated by reliance on international payroll systems that weren’t designed for the complexity of the Australian industrial relations system.

“There is an expectation that Australian employers will undertake regular reconciliations of their payroll and top up employees who have not been paid in accordance with their minimum entitlements,” he said.

“Our research shows organisations are paying closer attention to payroll, but many still struggle with confidence, relying on manual processes or spot checks rather than broad and systemic audits.”

According to Yellow Canary, payroll compliance was no longer something boards could treat as operational detail, as it needed to be reinforced by people and processes that surfaced issues early, rather than after they escalated.

Within the report, it was noted that low confidence in payroll accuracy emerged as the biggest risk based on organisations being uncertain around pay cascades across superannuation, leave and payroll tax, and didn’t want to be exposed to financial and reputational consequences.

“The biggest areas of concern we hear from employers related to interpreting modern awards, managing complex scenarios, and ensuring systems apply rules consistently,” Zeltzer said.

“Paying above award rates doesn’t automatically remove underpayment risk. When organisations start digging into awards and classifications, they often uncover a broader chain of issues such as superannuation, long service leave, and even payroll tax.”

“Payroll underpayments can trigger a snowball effect. One issue can expose multiple compliance risks, escalating complexity if they’re not addressed early.”

In terms of small businesses, the report made clear that they faced the same award complexity as much larger organisations, which usually meant they felt the impact faster as they had less margin to absorb mistakes.

However, payroll confidence was shown to drop quickly in growing organisations when systems and processes didn’t keep pace with change.

Zeltzer said growth often introduced new roles, new agreements, and new complexity which was where risk often “quietly entered”.

Payroll compliance had outgrown the idea that it sat with one team, and treating it as a payroll-only responsibility was one of the biggest structural risks organisations faced, Zelter added.

The report highlighted that confidence dropped noticeably when organisations only reviewed payroll after something went wrong, or relied heavily on manual audits.

Zeltzer said creative checks didn’t create assurance, they created blind spots.

“Confidence comes from knowing what’s happening in payroll today, not from relying on audits months or years old. Many businesses have introduced training and awareness initiatives since the new laws, which is a good first step,” he said.

“But what’s needed is visibility, governance, and processes that prevent errors before they occur. The goal isn’t perfection on day one.”

“Small, deliberate changes, clearer ownership, better data, culture of compliance and regular audits, can significantly reduce risk over time.”