The Compliance Clock Is Ticking: Payroll, Super and Modern Slavery Reforms

Keeping up with workplace compliance has never been more important. Recent changes to minimum wages and superannuation obligations, coupled with proposed reforms to Australia's modern slavery regime, are increasing the compliance burden on employers and placing business practices under greater scrutiny.

Wage Compliance in the Spotlight

The Federal Court's decision in Fair Work Ombudsman v Woolworths Group Limited & Ors [2025] FCA 1092 was an important reminder of the risks associated with any organisations’ failure to meet legislative wage requirements.

The case involved findings that some employees of Woolworths and Coles had not received their full pay entitlements across pay periods. Because salaries were high enough over a year, the employers argued that higher payments made to employees in some pay periods should be taken into account and offset against any underpayments that occurred in other pay periods. 

However, the Court rejected this approach, reinforcing an important payroll principle: employees must receive the correct pay and benefits in the period in which they are earned. Employers cannot generally rely on overpayments made in one pay period to make up for underpayments in another. The decision highlights the importance of regularly reviewing payroll practices and salary arrangements to ensure employees are paid correctly and on time.

The Court also held that employers must be keeping records of the hours worked by employees in a form which is readily accessible by regulators. For certain employees subject to wage requirements under industrial instruments, an employer must have a system for recording hours and days worked, and any overtime, in order to audit wages and produce to regulators if requested. The failure to keep these kinds of records amounts to a breach attracting a civil penalty under the Fair Work Act 2009 (Cth).

Why does this matter?

The Woolworths decision serves as a timely reminder that wage compliance failures can expose employers to significant legal, financial and reputational risk.

Key risks include:

• Significant penalty exposure: Wage compliance breaches and record-keeping failures can quickly escalate, with each breach constituting a separate contravention and attracting a civil penalty. This can greatly increase an employer's exposure to penalties and enforcement action.
• Reverse onus of proof: Inadequate payroll and timekeeping records can make wage disputes difficult to resolve. Without accurate records, employers face a presumption in favour of the employee’s claim of underpayment, unless records show otherwise. Without records to disprove claims, employers will find it difficult to defend claims for underpayment.

How can employers ensure they are getting it right? Wage compliance starts with the fundamentals: 

• Having a system for recording all hours worked by employees;
• Maintaining accurate records of hours worked and entitlements accrued;
• Conducting regular payroll audits, and 
• Reviewing overtime policies and practices to ensure employees are only working approved overtime; and
• Auditing wages paid across pay periods to ensure employees are being paid correctly for all hours worked.

Navigating minimum wage compliance 

Updating pay rates alone may not be sufficient. Employers should review whether employees remain better off overall compared with the relevant minimum employment standards and whether their current remuneration arrangements continue to satisfy legal requirements.

Getting it wrong can be costly. What begins as a payroll oversight can quickly become an underpayment claim, exposing employers to repayment obligations, civil penalties and, for deliberate conduct, potential criminal liability. 

The Shift to Payday Super

Payday super is now a reality. From 1 July 2026, employers are required to pay superannuation contributions at the same time as employees are paid, with contributions needing to reach the employee's nominated superannuation fund within seven business days of wages being paid.

Unlike other legislative changes, there is no transition period or buffer for employers. Organisations should already have reviewed their payroll systems and superannuation processes to ensure they can meet these requirements consistently. For those that have not, now is the time to act. Delays, administrative errors or system failures can quickly result in non-compliance, exposing employers to ATO enforcement action and potential claims under the Fair Work Act 2009 (Cth).

The Next Phase of Modern Slavery Regulation

To date, modern slavery compliance has been focused on meeting reporting obligations. That may soon change. The Federal Government has proposed reforms that would expose businesses with a consolidated revenue exceeding $100 million to criminal liability where they fail to adequately address modern slavery risks within their supply chains and cannot demonstrate they took reasonable steps to mitigate those risks. Combined with proposed civil penalties and expanded enforcement powers, the reforms signal a significant tightening of Australia's modern slavery framework.

So, what does this mean for businesses who have reporting obligations?

• They need to take their modern slavery obligations seriously
• They need to have robust due diligence processes in place 
• They need to have procedures in place to investigate and respond to identified modern slavery risks 
• They need to have evidence of the reasonable steps taken to prevent and address modern slavery risks