Australia's underpayment laws spark rethink on payroll compliance
Australia's introduction of hefty fines for criminal underpayments is intensifying calls for a "rethink" on payroll compliance ownership within organisations.
Marcus Zeltzer, co-founder and managing director of Yellow Canary, said the sole responsibility of payroll compliance should not be limited to payroll departments.
"I think we need to disabuse people of the view that payroll compliance is the sole responsibility of the payroll teams or the payroll departments," Zeltzer told HRD in an interview.
The head of payroll has been named by 26% of compliance leaders as the holder of primary responsibility in ensuring payroll compliance initiatives, found Yellow Canary. Chief executive officers and heads of HR are also among the top three.
But Zeltzer said responsibility for payroll compliance should come from everybody within the organisation.
"So, you've got this employee life cycle that starts before an employee joins an organisation and there are various different stakeholders — be it HR, workplace legal, the workforce planning people who are setting rosters and constructing workforces, the payroll OPs people, even the IT department that owns the configuration of the system.
"All of those individuals need to work together to put your best foot forward when it comes to compliance and they can't just operate in isolation. So, this is a whole-of-organisation responsibility, not just the payroll departments."
In this shared responsibility, Zeltzer said HR leaders play a "pivotal" role.
"The first thing that HR leaders can do is just get people together to talk about payroll compliance," he said. "HR leaders have the ability to bring various stakeholders within an organisation together, which is actually what's really needed to address this issue."
HR’s role starts at the beginning of the employee life cycle.
"When employees are recruited, there's a whole process of onboarding where their classification is set and their alignment with an award or an enterprise agreement is done," Zeltzer said.
"HR's right at the centre of that — from the job design to the onboarding, to where they're starting the first day."
In fact, Zeltzer noted that one of the common causes of underpayments is when employees are not classified correctly when they start at work.
"So, one of the incremental changes that can happen is just undertaking a regular, maybe on an annual basis… look at your job descriptions; have a look at how they map classifications under an award or an enterprise agreement, and have a look at what people are actually doing every day," he said.
HR leaders have to make sure that job descriptions reflect what employees do every day.
"If not, then there might need to be an adjustment. So just by putting that one little change in, you're going to capture… what is a pretty common cause of underpayments."
Australia's new underpayment laws, which came into effect in January 2025, criminalise wage theft, placing the onus on employers to ensure that workers are paid accurately and on time.
The new laws significantly increase the maximum penalty for a contravention related to intentional underpayments.
Zeltzer noted there were a lot of concerns among organisations over the potential criminal sanctions under the new legislation. His advice: Don't panic.
"Focus on the small wins. Focus on starting a conversation about payroll compliance and acknowledge that this is not an HR issue, it's definitely not a payroll issue — it's a whole-of-organisation issue that requires a whole-of-organisation approach to address it," he said.
"Understanding the role that each individual plays in payroll compliance is a good first step, and understanding the impact that it has on an organisation is another follow-up step."