Payroll errors rarely happen once, warns SKG’s Tracey Broers. They repeat across pay cycles until someone finally checks.
Recent high-profile underpayment cases are a reminder that payroll compliance is not simply an administrative function. It is a governance and risk issue that requires the attention of business leaders.
The common thread in many underpayment matters is rarely one isolated mistake. More often, problems arise from a combination of incorrect system configuration, incomplete data, manual processes, insufficient oversight and unclear accountability. If those weaknesses are not identified early, errors can be repeated across multiple pay cycles and affect large numbers of workers.
For SMEs, the key lesson is simple: prevention is far better than remediation.
The right tools for the job
Payroll and workforce management systems must be fit for purpose and appropriate for the complexity of the workforce. Having the right tools for the job is fundamental.
Technology can reduce risk by improving consistency, automating calculations, creating audit trails and flagging exceptions. At SKG, our internal software helps streamline workforce and payroll-related processes, improve visibility and reduce unnecessary manual handling.
This matters because every manual process introduces a human risk factor. A pay rate can be entered incorrectly, an allowance can be overlooked, a timesheet can be coded incorrectly, or an approval can be missed. Good people and strong processes remain essential, but automation can significantly reduce opportunities for avoidable error.
Technology, however, is not a substitute for governance. A system will consistently apply the rules it has been configured to apply. If the configuration is wrong, or the data feeding the system is inaccurate, technology can reproduce an error at scale. Systems therefore need regular validation, testing and review.
Managers need to understand award obligations
Payroll compliance does not sit solely with payroll or finance teams. Managers responsible for award-based roles also play a critical part.
They need sufficient awareness of the award conditions that apply to their workers, including shift allowances, overtime, penalty rates and allowances payable for particular duties or tasks.
The manager closest to the work is often best placed to know that a worker has performed a task attracting an additional allowance or worked in circumstances that change their entitlement. If that information is not recognised, recorded and communicated correctly, a worker can be inadvertently underpaid even when the payroll system itself is functioning as designed.
For this reason, training managers in the fundamentals of applicable awards is an important preventative control.
At SKG, updated award information is shared with relevant managers through toolbox talks. This helps translate technical changes into practical information managers can apply in day-to-day operations. Rather than relying on managers to independently identify and interpret every update, toolbox talks provide a structured opportunity to explain what has changed, who it applies to and what needs to be done differently.
Regular training and refresher sessions support this approach. Payroll compliance cannot be covered once and then assumed to remain current indefinitely. People change roles, new managers join the business, awards are updated and workplace legislation evolves. Ongoing training helps reinforce expectations and prevents knowledge gaps from developing over time.
Accurate data and clear accountability
Payroll is only as accurate as the information feeding it.
Businesses need controls around how worker information is entered, changed and approved. Changes to classifications, pay rates, working arrangements and employment status should be documented and communicated promptly.
Time and attendance data also needs to be reliable, particularly where shift work, overtime, penalties or task-based allowances apply.
Responsibility should be clear across operations, HR, payroll, finance and risk. Businesses should know who is responsible for monitoring changes to workplace obligations, updating systems, approving changes, reviewing exceptions and escalating potential issues.
At SKG, this broader governance approach is important because payroll risk is best managed when compliance is built into day-to-day business processes rather than treated as a periodic administrative exercise.
Monitoring legislative and award changes
Another important lesson for SMEs is the need to actively monitor changes to workplace legislation and industrial instruments.
Awards, minimum rates, allowances and employment obligations can change. Businesses need a defined process for identifying those changes, assessing whether they affect the workforce and ensuring any required action is implemented.
At SKG, relevant legislative and award updates are monitored as part of the compliance process. Where a change affects award-based workers, updated information is communicated to managers and supported through training or toolbox talks where appropriate. Required changes can then be reflected in operational and payroll processes.
The critical point is that awareness alone is not enough. A business can know an award has changed and still create an underpayment if that information is not translated into system updates, manager instructions or payroll actions.
For SMEs, a practical approach is to assign clear responsibility for monitoring changes, document what has been reviewed and establish a consistent process for communicating and implementing updates.
Building awareness of wage theft obligations
The introduction of Australia’s federal criminal underpayment laws has reinforced the seriousness of payroll compliance. Since 1 January 2025, intentionally underpaying a worker’s wages or entitlements can constitute a criminal offence. Honest mistakes are not captured by the criminal offence, but the change highlights the need for businesses to understand and actively manage their obligations.
In preparation for this change, SKG incorporated wage theft awareness training for workers. The training reinforces the importance of accurate payment practices and helps ensure those involved in workforce and payroll decisions understand the potential legal consequences of intentionally underpaying workers.
This creates another important layer of protection. Workers and managers need to understand not only what the organisation expects, but why those controls matter.
Regular review is essential
Businesses should not wait for a worker complaint, regulator enquiry or external audit before checking whether payroll processes are working properly.
Regular reviews should test classifications, pay rates, allowances, overtime, penalties and other entitlements. Exception reporting and reconciliations can help identify unusual payments or discrepancies early.
Reviews should also test whether system settings remain accurate and whether information flowing from operations into payroll is complete. In award-based environments, it is particularly important to confirm that allowances or conditions linked to specific tasks, shifts or locations are being captured correctly.
A useful question for leaders is: if we were asked today to demonstrate why each worker is being paid correctly, could we do it?
If the answer is unclear, that is a risk worth investigating.
What to do if an issue is identified
If a potential underpayment is discovered, businesses should act promptly. Establish who may be affected, preserve relevant records, identify the period involved and determine the underlying cause.
Where appropriate, specialist workplace relations or legal advice should be obtained, affected workers should be communicated with transparently and confirmed underpayments should be rectified as quickly as possible.
Remediation should not stop at back-payment. The business also needs to understand why the control failed and strengthen the process, so the issue does not recur. That may mean correcting system settings, introducing additional checks, improving manager training or changing how information is communicated between operations and payroll.
The broader lesson from recent cases is that payroll compliance depends on several controls working together: the right tools, accurate data, reduced reliance on manual processes, trained managers, informed workers, regular reviews, active monitoring of legislative changes and clear accountability.
For SMEs, getting payroll right is not only about meeting a legal obligation. It is about protecting workers, maintaining trust and demonstrating that sound governance is embedded in the way the business operates.
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