Navigating Australia’s industrial relations landscape can be complex and creates ongoing challenges for employers trying to balance compliance with operational efficiency
From changes to Modern Awards, Enterprise Agreements, and shifting legislative requirements, even well-intentioned businesses can stumble. Understanding this space and knowing what regulatory changes are coming is critical to managing risk, maintaining fairness, and avoiding costly penalties.
In this post, we break down the key issues employers need to be across such as meeting worker’s legal entitlements, ensuring compliant pay outcomes, understanding the distinct roles of regulatory bodies, and why this topic continues to attract media attention.
Compliant Pay Outcomes – Current and Future State
There are currently 121 Modern Awards in Australia. Awards set out pay rates and conditions of employment for workers and relate to industries or occupations. For employers, staying compliant requires paying the correct award wage for the job classification and ensuring employees are paid correctly for every element of their work, including overtime, allowances, penalty rates, and leave entitlements.
Recent underpayment offences have exposed gaps in payroll systems, rostering practices, and employer knowledge of award requirements. In the last 12-24 months in Australia, we have seen increased penalties for non-compliance, legislation amendments such as Closing the Loopholes under Fair Work, and more rigorous auditing. This has increased the urgency for businesses to take proactive action to ensure compliance.
With the emergence of Fair Work over the last decade, and more information and resources available to workers, such as the Fair Work Pay and Control Tool (PACT), Australian employees are becoming more aware of their rights and pay entitlements. In the period 2023-2024 alone, a total of 6.3 million calculations were completed using the PACT tool. Further to this, visits to Fair Work’s website has increased from 10.2 million in 2021-2022 to 12.6 million in 2023-2024.
With the introduction of Payday Super in Australia from 1st July 2026 – which will see a shift from quarterly superannuation payments to payment at same time as wages – an even greater focus on correct pay outcomes is required so superannuation calculations are correct.
Better Off Overall Test – Paying a Salary is Not Enough
A common misconception among employers is paying an annualised salary and not worrying about the finer details of the award. Paying a flat salary without tracking hours and entitlements under an award can result in costly penalties and employers should review employee pay arrangements regularly to ensure they are staying compliant.
This is where the Better Off Overall Test (BOOT) comes in. The test checks that an employee is better off under a proposed Enterprise Agreement or salary arrangement than they would be under the relevant Award. The test considers actual hours worked, loadings, allowances, public holiday rates and overtime.
In other words, if you’re offering an agreement or salary, you must make sure the employee is not missing out on any important pay or conditions they would normally get under the Award.
It’s vital for businesses to ensure their employees are well protected under the law while also safeguarding your business from potential penalties.
Companies are also stepping away from annualised BOOT testing to a greater frequency (quarterly or monthly). Some organisations have automated BOOT testing to be part of their pay cycles and ensure employees are always paid at the higher rate (salary or award).
Changing Legislation – The Role of Fair Work Commission and Fair Work Ombudsman
Both are quite different, and as industrial relations reform evolves, understanding the respective roles of the Fair Work Commission (FWC) and Fair Work Ombudsman (FWO) is key.
- Fair Work Commission (FWC): Australia’s national workplace relations tribunal, the Fair Work Commission resolves disputes and sets minimum employment standards. It also approves Enterprise Agreements and conducts the BOOT.
- Fair Work Ombudsman (FWO): Australia’s national workplace regulator, the Fair Work Ombudsman is responsible for ensuring compliance with the Fair Work Act and related legislation. The FWO enforces compliance with workplace laws, pay rates and conditions, investigates complaints including underpayments, workplace rights and discrimination, conducts audits and issues fines. They also offer educational tools and resources to assist employers and employees in understanding their rights and obligations.
Focus of Media in This Space
The media attention around wage compliance has been relentless in recent years, with many high-profile Australian businesses being publicly named and criminalised for wage theft cases – projecting the topic into the spotlight. This can be detrimental to a brands reputation, affect investors’ confidence and employee morale, and result in significant financial penalties.
This media scrutiny on the subject is sending a clear message to employers to place higher priority on ensuring they are meeting their worker’s correct pay/legal entitlements – while also improving their payroll systems and governance, A proactive, transparent compliance culture is not only good practice, but also a valuable reputational safeguard.
In summary, when it comes to wage compliance, there’s no room for error! With increased regulation, ongoing media focus, and harsher enforcements, employers need to invest in better payroll systems, regular compliance reviews, informed HR and Finance teams. Workforce Management and Workforce Compliance solutions are also a helpful support to automate the process and remove the pressure.
Being proactive today can help avoid costly mistakes tomorrow.
