Are We Paying Employees Correctly? 12 Award Compliance Checks for Australian Employers

Paying employees above the minimum hourly rate does not necessarily mean your business is award compliant.

An employee can still be underpaid because they have been placed in the wrong award classification, an allowance has been missed, overtime has been calculated incorrectly or their salary no longer covers all the entitlements they would have received under the relevant modern award.

Award compliance can be particularly difficult when employees work variable hours, rotating shifts, weekends or public holidays. The risk also increases when roles evolve over time but classifications and payroll settings remain unchanged.

Minimum award wages increased by 4.75% from the first full pay period starting on or after 1 July 2026. This provides a timely opportunity for Australian employers to complete an award compliance check rather than updating base rates in isolation.

The following 12 questions can help you identify where your business may have an award, classification or payroll compliance risk.

1. Have you identified the correct modern award?

The first step is determining which modern award, enterprise agreement or other industrial instrument applies to each employee.

Award coverage should not be decided from a job title alone. An employee called an Administration Coordinator, Operations Manager or Customer Service Specialist could be covered by different awards depending on the employer’s industry and the work they actually perform.

When reviewing award coverage, consider:

• The industry in which the employer operates
• The occupation and duties of the employee
• The coverage and exclusion clauses in the potential award
• Whether an enterprise agreement applies
• Whether another award provides more specific coverage
• Whether the employee may genuinely be award free

The coverage clause is usually a sensible place to begin, but it should be read together with the award’s classification structure and definitions.

A common compliance problem arises when a business applies one award to its entire workforce without considering whether separate occupational coverage may apply to corporate, administrative, technical or specialist roles.

2. Is each employee classified at the correct award level?

Identifying the correct award is only part of the process. Each award-covered employee must also be allocated to an appropriate classification level.

The classification should reflect the work the employee actually performs, including:

• The complexity of their responsibilities
• The level of supervision they receive
• Whether they supervise other employees
• Their decision-making authority
• The skills, knowledge and qualifications required
• Their accountability for customers, equipment, budgets or operations
• The degree of judgement and independence involved in the role

Job titles do not determine classifications. Internal grades, salary bands and market titles may help with workforce management, but they do not replace the classification definitions contained in the award.

For example, calling someone a manager does not automatically make that person award free. If their work mainly involves duties described within an award classification, the award may continue to apply.

3. Do position descriptions reflect what employees actually do?

Position descriptions are useful during an employee classification review, but only when they are accurate.

Roles often change gradually. An employee may begin supervising others, operating more complex equipment, making independent decisions or taking responsibility for additional processes. If their position description and award classification are not reviewed, the employee may remain at a level that no longer reflects the work being performed.

Ask managers to review current responsibilities rather than simply confirming an old position description.

Useful questions include:

• What decisions can the employee make independently?
• Does the employee train or supervise others?
• Has the technical complexity of the role increased?
• Is the employee regularly performing duties associated with a higher level?
• Which responsibilities occupy most of the employee’s time?

This creates a more reliable basis for classification and also helps the business maintain clearer role documentation.

4. Were the 2026 award rate increases applied correctly?

From 1 July 2026, minimum award wages increased by 4.75%. The new rates generally apply from the first full pay period starting on or after 1 July, rather than automatically applying to every hour worked from that date.

Employers should confirm:

• The correct 2026 award pay guide was used
• Employees were mapped to the correct classification and pay point
• The increase was applied from the correct pay period
• Junior, apprentice and trainee rates were updated where applicable
• Casual rates include the correct casual loading
• Payroll calculations use the current base rate
• Any linked allowances or penalty calculations were also updated

Updating a payroll table without confirming employee classifications can carry an existing error into the new financial year. The annual wage increase should therefore be treated as an opportunity to review both rates and classifications.

5. Are overtime and penalty rates calculated correctly?

An employee may receive the correct ordinary rate but still be underpaid when working outside ordinary hours.

Depending on the award, additional payments may apply when an employee works:

• More than the permitted ordinary hours in a day or week
• Outside the award’s span of ordinary hours
• On a Saturday or Sunday
• On a public holiday
• Before or after a rostered shift
• Without a required break between shifts
• Beyond their agreed part-time hours
• During afternoon, night or rotating shifts

The interaction between overtime, shift penalties and weekend rates can be complicated. Some awards require one payment to be made instead of another, while others contain specific rules about how rates interact.

Payroll testing should include unusual working periods, not only a standard Monday-to-Friday week.

6. Are all applicable allowances being paid?

Allowances are a common source of payroll errors because they may depend on circumstances that payroll cannot identify without information from managers or employees.

An award may provide allowances for:

• Leading hands or employees supervising others
• First aid responsibilities
• Tools and equipment
• Uniforms and laundry
• Meals
• Travel and vehicle use
• Working in cold, wet, dirty or hazardous conditions
• Qualifications, licences or specialist skills
• On-call or recall arrangements
• Distant work or temporary accommodation

Some allowances apply for every hour worked, while others are paid daily, weekly or only when a particular event occurs.

Create an allowance register showing which employees may qualify, what triggers the payment and how the information reaches payroll. This is more reliable than expecting payroll staff to identify allowances from job titles.

7. Are casual employees receiving the correct entitlements?

Casual employees generally receive casual loading instead of certain entitlements available to permanent employees. However, casual loading does not replace every other award entitlement.

A casual employee may also be entitled to:

• Weekend and public holiday penalty rates
• Overtime
• Shift penalties
• Allowances
• Minimum engagement payments
• Payment for required training or meetings

Minimum engagement requirements are particularly easy to overlook. If an award provides a minimum engagement of three hours, for example, a casual employee who attends work for a shorter period may still need to be paid for three hours.

Employers should also review whether casual employment remains appropriate where an employee has developed a regular and predictable working pattern.

8. Are part-time employees working outside their agreed hours?

Many modern awards require a written agreement setting out a part-time employee’s regular hours or pattern of work.

If the employee regularly works outside those agreed hours, overtime or another additional payment may apply. The outcome depends on the terms of the relevant award and any valid variation to the employee’s agreed hours.

Review:

• The employee’s written part-time arrangement
• Their regular days and starting and finishing times
• How additional hours are approved
• Whether changes are recorded in writing
• Whether overtime is triggered by work outside agreed hours
• Whether the employee receives minimum daily engagement payments

A contract stating only the employee’s total weekly hours may not satisfy all the requirements of the relevant award.

9. Do employee salaries cover all award entitlements?

A salary above the award rate does not automatically remove award obligations.

For each salaried, award-covered employee, calculate what they would have received under the award based on the hours and working arrangements that actually occurred.

The calculation may need to include:

• Ordinary award wages
• Overtime
• Weekend penalties
• Public holiday penalties
• Shiftwork payments
• Allowances
• Annual leave loading
• Other award-specific entitlements

The result should then be compared with the salary and any additional payments made to the employee.

The employment contract should clearly identify which award entitlements the salary is intended to satisfy. Broad wording stating that a salary covers “all entitlements” may not provide enough information to support the arrangement.

Salary coverage should also be reviewed after award rate increases, changes to working hours, promotions or roster changes.

10. Are required annual salary reconciliations being completed?

Some modern awards include annualised wage arrangement provisions that require employers to perform regular reconciliations.

Depending on the relevant award, the employer may need to:

• Document how the annualised wage was calculated
• Identify the award entitlements included in the salary
• Specify the maximum overtime or penalty hours covered
• Record starting and finishing times
• Compare the salary paid with the employee’s award entitlements
• Complete a reconciliation every 12 months
• Complete a reconciliation when employment ends
• Pay any identified shortfall within the required timeframe

The exact requirements differ between awards, so employers should review the clauses applying to their employees rather than relying on a single process for every salaried role.

Even where a formal annualised wage clause is not being used, a regular salary comparison remains a useful compliance control.

11. Are working hours and payroll records complete?

Employers generally need to keep employee records for seven years. Records should be accurate, accessible and detailed enough to explain how an employee’s pay was calculated.

Relevant records may include:

• Employment status
• Award and classification
• Pay rates
• Ordinary hours
• Overtime hours
• Starting and finishing times
• Gross and net payments
• Allowances and penalties
• Leave taken and leave balances
• Superannuation contributions
• Salary arrangements
• Individual flexibility agreements
• Changes to classifications or pay rates

A payroll system may show what was paid without showing whether the amount was correct. Employers should also retain the source information used to determine hours, classifications and entitlements.

If the business could not reconstruct an employee’s pay calculation during a review, its record-keeping process may need improvement.

12. Has the business tested actual payroll outcomes?

Policies, contracts and payroll configurations are important, but the final question is whether employees have received the correct amount.

Select a representative sample of employees and recalculate their pay manually or through an independent compliance model.

Your sample should include:

• Different awards and classification levels
• Full-time, part-time and casual employees
• Salaried and hourly paid employees
• Weekend and public holiday work
• Overtime
• Shiftworkers
• Employees receiving allowances
• New starters and terminated employees
• Employees whose responsibilities recently changed

Testing one standard pay period may not reveal the real risks. Include periods containing overtime, public holidays, shift changes, unpaid leave or unusual working arrangements.

When a discrepancy is identified, investigate whether it is an isolated error or a systemic problem affecting other employees and earlier pay periods.

What should you do if you identify a potential underpayment?

Finding an error does not necessarily mean that the business has intentionally underpaid an employee. However, the issue should be addressed promptly and carefully.

A practical correction process should include:

1. Confirm the correct award, classification and entitlement.
2. Identify all employees who may be affected.
3. Determine the period covered by the error.
4. Recalculate the employee’s correct gross pay.
5. Review any related superannuation and leave impacts.
6. Correct the payroll configuration or internal process.
7. Pay the affected employee any amount owed.
8. Explain the correction clearly and retain supporting records.
9. Introduce a control to prevent the error from recurring.

If the issue is complex or affects multiple employees, the business may need workplace relations, payroll, remuneration or legal advice.

How often should you complete an award compliance check?

An award compliance review should not be treated as a one-off exercise.

A full review should generally be considered at least annually, with additional checks when:

• Award rates or conditions change
• A new role is created
• An employee’s responsibilities increase
• A new roster or shift pattern is introduced
• The business changes payroll systems
• An enterprise agreement is introduced or replaced
• The business acquires another operation
• Employees raise concerns about their pay
• A payroll error is identified

The annual wage increase is a useful trigger, but classifications and working arrangements should also be reviewed throughout the year.

Award compliance checklist for employers

Use this summary to identify areas that may need closer review:

• Every employee has been assessed for award coverage
• Award-covered employees have documented classifications
• Position descriptions reflect actual responsibilities
• Current award rates are loaded into payroll
• Overtime and penalty rules have been tested
• Applicable allowances have been identified
• Casual loading and minimum engagements are correct
• Part-time arrangements are documented
• Salaries have been tested against award entitlements
• Required annual reconciliations are complete
• Time and pay records are retained
• Actual payroll outcomes have been independently checked

If you cannot confidently confirm each item, your business may benefit from a more detailed award compliance review.

Build confidence in your award and payroll arrangements

Modern awards contain detailed rules that can be difficult to translate into contracts, rosters and payroll calculations. The risk often develops gradually as employee responsibilities, working patterns and award rates change.

A structured award compliance check can help your business identify incorrect classifications, missed entitlements and payroll configuration issues before they become larger and more expensive problems.

Remunera supports Australian employers with modern award coverage reviews, employee classification assessments, pay rate validation and cost modelling. Our review connects the award requirements with the roles, working patterns and payroll arrangements operating within your business.

Learn more about Remunera’s Modern Award Compliance and Employee Classification Review.

This article provides general information and does not constitute legal advice. Award coverage and employee entitlements depend on the circumstances of each employment arrangement.