Deliberately underpaying employees was made a criminal offense on January 5 following amendments to Australia’s Fair Work Act, with individuals and businesses now potentially liable. While unintentional errors will not attract criminal penalties, Yellow Canary estimates that underpayments represent between 1% and 3% of the total cost of capital in the market.
Yellow canary Survey of 533 compliance leaders in Australia There is an increased risk around underpayments. Attracting more tech buyers to proactive payroll compliance tools:
- 23% plan to adopt the technology in the next one to two years.
- 21% of businesses plan to implement these tools in the next 12 months.
- 17% said they were satisfied with the manual compliance process.
- 15% were curious about more proactive payroll technologies but had no plans to implement them.
“The introduction of the Closing Loopholes Act, including the criminalization of wage theft, is an important moment for Australian businesses,” Yellow Canary managing director Marcus Zeltzer said in the report.
“Our research shows that while many businesses are making payroll compliance a top priority, a significant number are still relying on poor manual processes or have not conducted thorough reviews.”
See: Best practices for maintaining payroll compliance
Payroll teams are concerned that they are not paying staff correctly.
Almost half (48%) of those surveyed by research house Lonegren Research on behalf of Yellow Canary said they were making Salary compliance Closing loopholes a top priority before legislation.
However, 93% of local businesses with at least 50 employees still say they have an area of concern regarding potential employee underpayments in their organization after the law goes into effect. Additionally, 17% expressed uncertainty about paying their staff properly, while 19% expressed doubt. Could be an underpayment issue but not confirmed..
The research report identified several key drivers of payroll underpayment concerns:
- 39% of respondents had concerns about staying current with legislation and obligations, reflecting the complexity of remaining compliant in an evolving regulatory environment.
- 37% cited concerns about a lack of internal communication, noting that collaboration and information flow across departments reduces errors and inconsistencies. Payroll processes.
Another 32% had concerns about time and resource constraints for payroll audits and historical reviews. Meanwhile, Reliability of payroll software in ensuring compliance was a concern for 31 percent.As was aligning rostering or time and attendance processes, which are often managed through systems integration.
See: 8 Best Payroll Software for Australian Businesses
Only 7% of respondents said there was no area of concern regarding potential underpayments. However, Yellow Canary said it’s unclear whether this reflects genuine assurance or a lack of awareness, given that it found some non-compliance in 100% of its clients in its work reviewing $70 billion in wages. found
Proactive compliance and AI can improve the payroll scorecard.
Australia has experienced widespread problems with underpayments—affecting large private and public sector organizations—in many cases due to Australia’s complex system of payment awards.
The Yellow Canary report found that many employers still rely on “less reliable” methods:
- 31% still perform manual audits with spreadsheets.
- 32% Review paycode configurations.
- 37% use sampling for payroll checks.
See: A Step-by-Step Guide to Payroll (The Right Way)
“While businesses may feel confident in their manual methods, these processes are inefficient, error-prone, limited in scalability, and unable to keep up with the increasing complexity of compliance,” the report states.
Adopting proactive payroll compliance technologies is expected to help mitigate the problem by replacing more manual review processes with regular tech-supported audits of workforce payroll data.
The inclusion of AI could support these efforts — but some businesses are skeptical.
More than half (59%) of Australian businesses with 50 or more employees are optimistic about the ability to introduce Artificial intelligence In the framework of their future payroll compliance.
AI is not yet commonly used in payroll compliance in Australia, but the report says the technology’s evolution shows “great potential to integrate into existing processes”.
For example, AI can be used. Analyze payroll data patterns.and identify anomalies — such as incorrect pay codes, underpaid employees, or misclassifications — to provide real-time insight to payroll teams.
However, 27% of respondents either doubt AI’s ability to improve payroll compliance or AI is sure to introduce more challenges and complicate the payroll process. In the future
“Businesses must overcome challenges such as integration issues, data privacy concerns, and resistance to change before mass adoption can take place. [of AI]” said the report.