Pay compliance is a major issue for Australian employers and while AI promises to help, HR leaders are wary
Paying employees what they are owed when they are owed it is essential and mistakes can be costly - in backpay, fines and reputational damage.
The financial risks are sobering. In the 2023–24 financial year alone, the Fair Work Ombudsman (FWO) recovered $473 million in unpaid wages and entitlements, impacting nearly 160,000 workers. In some cases employers also faced hefty "contrition payments" as part of Enforceable Undertakings with the FWO.
The regulatory landscape is also getting tougher, with new legislation set to criminalise deliberate wage underpayments from January 2025.
A spokesperson for the FWO told HRD: “Payroll deficiencies are sometimes mentioned in relation to the cause of underpayments when we sign an Enforceable Undertaking. Employers should note that as of 1 January 2025, intentionally underpaying an employee’s wages or entitlements can be a criminal offence. This doesn’t include honest mistakes.”
With HR and payroll teams under growing scrutiny to ensure compliance in real time and not retrospectiely, artificial intelligence (AI) is being viewed as a potential gamechanger for pay compliance.
AI to help solve pay compliance issues
Shannon Karaka (pictured right), country lead ANZ at global payroll platform Deel, believes automation can significantly reduce the administrative burden currently weighing down payroll teams.
“The application of artificial intelligence (AI) will change the way payroll is managed in the future – by streamlining a lot of the manual tasks that payroll functions have to do today,” Karaka told HRD.
“On top of that, if you include human involvement when it comes to monitoring, you know what your system is doing moving forward and allows you to be risk averse and ensure compliance down the line, thanks to data,” he added.
Concerns around AI suitability in payroll compliance
Deel’s research indicates strong interest in AI-enhanced payroll, with 47% of respondents already leveraging AI, and another 40% exploring its use. However, concerns around trust remain a sticking point—88% of respondents cited doubts about AI’s reliability and accuracy.
Whilst acknowledging the worries, Karaka highlighted the importance of using critical thinking when using technology such as this to give a competitive advantage.
“It [AI] should be viewed as an instrument to help payroll teams identify variances in payroll and flag those variances throughout the process. The payroll team itself should still have overall leverage of those insights to ensure it’s operating compliantly and efficiently.”
AI usage in payroll compliance
Whilst scepticism on the use of AI in ensuring payroll compliance is high, its use case has been described as not just a tech upgrade – but a shift in strategic positioning for payroll teams.
HRD spoke to vice pres
ident of payroll product management at human capital management platform, Workday, Jen Cozier (pictured left), who belives AI really is the future.
“You must make sure you’re ahead of what’s coming and making sure you’re able to put changes into practice quickly – we find that our customers count on us to be ahead of the game, you need to be proactive about compliance. AI does that,” she noted.
With more than 30 years in the payroll space, Cozier views AI as the “big leap” that payroll teams have long anticipated—one that moves them beyond transactional duties toward a more influential organisational role.
“This is the thing that helps us get to where we need to go,” Cozier said, “in having a strategic seat at the table. Nothing changes when you use AI, it’s just that the tools you’re using are getting better to actually get us to where we need to go.”
AI in shaping the future of payroll compliance
In addition to present benefits, AI also has been described as a way of attracting and retaining the future in payroll talent.
“We, at Workday, need to be one step ahead. AI makes that more appealing not just to us as a business, but to the people we hire. This isn’t just tech transformation, it’s a people transformation, too,” Cozier told HRD.
“People focus too much on the tech itself and forget to notice that it’s just another amazing tool that a person can use to make their life easier. You must adopt these modern tools and the future of payroll is those who focus on analytics, giving back, extreme value to the organisation – not just making sure people get paid.”
