Australia has some of the most complicated pay structures in the world and 121 different Modern Awards. Calculating employee pay correctly can be challenging, especially if you have full-time, part-time, and casual employees or apprentices at different stages of their training or multiple awards applying across your workforce. You also need to be fully aware of overtime rates, penalty rates, loadings, and allowances.
Wrong data in, wrong pay out
As an employer you’re ultimately responsible for ensuring your employees are paid correctly, on time, and they receive their full entitlements and benefits.
Whether you use an automated or manual payroll system, or outsource your payroll to a specialist service provider, you’re responsible for any mistakes made when calculating the pay of your employees. You also need to be aware of the various employee and payroll tax rates, and compulsory superannuation payments.
Paying employees incorrectly could result in incurring severe penalties by the ATO or Fair Work Ombudsman. You've heard of cases where businesses had to backpay workers or be hit with massive fines. In just one year (2023), the Fair Work Ombudsman recovered over $500 million in unpaid wages.
How Peninsula can help
If you’re unsure of the various entitlements, current awards for your industry, or the different pay rates that may apply to your employees, our team can offer pay rate advice and insights for your business and industry.
Although Peninsula does not provide payroll services or offer any financial advice, we can help you better understand your wage obligations to help you stay compliant and avoid costly mistakes.
Wage theft vs payroll error
Not paying employees is a serious issue but there is a big difference between genuine payroll errors and wage theft.
When a business underpays employees, avoids entitlements, and dodges superannuation, it is a deliberate choice to avoid paying wages. This is illegal and called wage theft in Australia.
Payroll error is something that happens one-off or occasionally due to technology or human errors and misunderstandings.
Some of the key differences between wage theft and payroll are:
wage theft is ongoing and can be happening for months or years, payroll happens once or occasional
there is an attempt by the business to fix the payroll error while wage theft is covered up or ignored by the business
Several businesses have often claimed they made a mistake while committing wage theft. At the end of it, intent makes a difference. Businesses and employers knowingly engage in wage theft while payroll errors are unintentional. As of 1 January 2025, wage theft is a criminal offence in Australia.
Common payroll errors
Underpayments
Common payroll errors include underpaying employees. Under the Fair Work Act 2009, employers must rectify underpayments as soon as they are identified.
Overpayments
Overpayments happen when an employer mistakenly believes an employee is entitled to the pay, or because of a payroll error. Fixing an overpayment requires agreement of the employee. If the employee agrees to repay the money, a written agreement should be made which sets out the reason for the overpayment and amount of money overpaid, and the way repayments will be made.
Steps to manage payroll errors
Once a payroll error has been made, employers can take steps to rectify the error:
Identify the error, the cause, and the accurate amount owed to the employee
Communicate with the employee clearly about the error, mention all details including timeline and suggest solutions
Once the employee has agreed to the solution, make a written agreement setting out relevant terms and conditions
If you are dealing with complex payroll issues, consult a professional
Grow your business with Peninsula
Peninsula offers comprehensive HR and WHS services for businesses including resources, advice, and software. Get access to a 24/7 advice line when you become a Peninsula client. Call us on 1300750491 to learn more.
This article is for general information purposes only and does not constitute as business or legal advice and should not be relied upon as such. It does not take into consideration your specific business, industry or circumstances. You should seek legal or other professional advice regarding matters as they relate to you or your business. To the maximum extent permitted by law, Peninsula Group disclaim all liability for any errors or omissions contained in this information or any failure to update or correct this information. It is your responsibility to assess and verify the accuracy, completeness, and reliability of the information in this article.