Employers who intentionally underpay employees now face severe consequences, including jail time and fines of up to $1,565,000 for individuals and the greater of $7,825,000 or three times the underpayment amount for corporations.
We surveyed 533 compliance leaders to evaluate how prepared Australian businesses are for the wage theft laws under the Closing Loopholes Acts, which came into effect 1st January 2025.
Our 2025 State of Payroll Compliance Report found that while many businesses are focusing on payroll compliance, critical gaps must be addressed to effectively navigate increasing regulatory pressures.
Steps taken to respond to the new wage theft laws
97% of businesses have taken steps to prepare for stricter wage compliance enforcement. Common initiatives include:
- Making payroll compliance a top priority (48%)
- Conducting thorough payroll reviews (47%)
- Increasing resources dedicated to compliance initiatives (45%)
However, only 39% of businesses have implemented proactive measures to prevent underpayments. This means 61% remain reliant on reactive strategies. Reactive strategies involve addressing compliance issues only after they arise, and can strain internal resources, disrupt operations, and erode stakeholder and employee trust.
Uncertainty in paying employees correctly
The report highlights that 17% of businesses are unsure if they are paying employees correctly, and 19% suspect underpayment issues but have yet to confirm them. While these percentages seem low, they point to systemic gaps in people, processes, and systems that allow errors to go unnoticed.
Underpayments—typically accounting for 1% to 3% of payroll—call for attention. Left unchecked, even small discrepancies can accumulate over time, leading to significant compliance challenges.
To tackle these issues, businesses must focus on perpetual monitoring—an automated, real-time assessment of compliance risks that helps catch issues before they become larger problems.
How payroll auditing and compliance tools help
The four pillars of payroll compliance—human resources, legal, technology, and workforce planning—are the foundation for creating robust compliance frameworks and maintaining ongoing payroll accuracy.
Payroll auditing and compliance tools, part of the technology pillar, help with perpetual monitoring and answer three critical questions for better compliance visibility:
- Accuracy: “Are we paying employees in accordance with the relevant pay rules?”
- Quantification: “If we haven’t paid employees correctly, how large is the issue?”
- Cause: “If we’ve identified an issue, what is the root cause?”
As the developer of Australia’s leading audit and automation platform, we have conducted over 100 compliance reviews, revealing non-compliance issues in 100% of cases.
Payroll auditing tools provide real-time insights, enabling businesses to perform regular reviews, detect hidden errors, identify root causes, and make timely, data-driven decisions with efficiency and confidence.
A start to a cultural shift
Employers have two primary responsibilities: keeping employees safe and paying them correctly.
Over the past 40 years, workplace culture has evolved to prioritise employee safety. With 22% of businesses actively addressing underpayment issues, we are now seeing a positive shift toward cultivating a culture of compliance—one that promotes ongoing compliance beyond the stricter enforcement measures introduced in January 2025.
Moving forward: The path to proactive compliance
Navigating wage theft laws is no longer optional. Businesses must embrace proactive compliance strategies to safeguard their finances and reputation.
While barriers such as cost constraints, lack of expertise, and outdated systems are common, they are surmountable. Simple steps, like integrating payroll compliance into regular meeting agendas or initiating team discussions, can drive meaningful change. Additionally, investing in the right tools, frameworks, and a compliance-oriented culture empowers businesses to safeguard against underpayments while meeting the demands of a more regulated payroll landscape.
Our 2025 State of Payroll Compliance Report dives further to uncover challenges, current compliance practices, and emerging technology trends.
