28 May 2026
When it comes to compliance, many businesses assume they’re doing the right thing. This applies to pay compliance: when they’ve got employment contracts in place and employees are paid their salaries and payroll is running without issue, everything looks compliant on the surface.
But here’s the reality that we’ve seen from working with businesses with the same setup. Many of them are unknowingly getting it wrong.
In Episode 5 of TALKING PEOPLE!, Jenna Paulin and Paul Jansz unpacked one of the most misunderstood areas of people management. These are Modern Awards, minimum pay rates, and employment compliance.
In the session, they explored why underpayments are constantly in the headlines, where businesses get caught out, and why even the most well-intentioned of employers and business owners can find themselves exposed to risk.
One of the biggest misconceptions that businesses have is thinking that employees on salaries are automatically considered “off award.”
That’s not how it works. Most employees are covered by a Modern Award, yes, even when businesses assume they’re no.
The confusion often comes from:
Modern Awards are not based on employer preference, and are determined by factors such as which industry the business operates in, and the actual duties employees perform daily.
This is where many employers unintentionally create risk.
A job title alone does not determine award coverage. Two employees with the same title may fall under completely different awards depending on the industry and the nature of their work.
As Paul explained during the episode, “It’s not about whether you think an award applies. It’s whether one actually does.”
A Modern Award is a document that sets out the minimum terms and conditions of employment on top of the National Employment Standards (FairWork).
Modern awards provide entitlements such as:
A key thing is that awards are not optional. If an award applies to an employee, businesses cannot contract out of it or ignore the award requirements on the basis of the employee being paid above the minimum rate.
This is why getting awards right is important. Getting it wrong can lead to underpayments, payroll errors, and even serious legal consequences.
So where do businesses usually get it wrong? Jenna and Paul went through the common compliance mistakes businesses commit (often without realising it!)
A common mistake is placing employees under the wrong award, or at the wrong classification level in the correct award.
This happens when businesses rely too heavily on job titles instead of assessing the actual duties and responsibilities that employees do on a day-to-day basis.
As roles evolve over time, classifications may also need to change. The duties of an administrative assistant hired two years ago could have changed from when they were first hired for the role. Businesses that fail to review classifications regularly can (and do) unknowingly create ongoing underpayment risks.
Another major area of risk is failing to properly account for entitlements like:
Many businesses assume that paying a “higher salary” means that these entitlements are automatically covered. However, this assumption can quickly become problematic, especially if there’s no proper reconciliation and documentation in place.
The episode also highlighted recent developments following major underpayment cases involving large Australian employers, where stricter expectations now apply to above-award salary arrangements and reconciliation processes. Watch the episode in full here.
One thing businesses are prone to underestimate is how annual wage increases can impact them.
Minimum pay rates are reviewed annually by the Fair Work Commission, with changes typically taking effect from 1 July each year.
For businesses, this means that pay structures should never be ‘set and forget.’ Annual increases can create flow-on effects across salary structures, payroll systems, overtime calculations, and above-award arrangements.
Set and forget pay structures are where risk starts, and businesses should be reviewing:
If your business hasn’t reviewed any of these in the past 12 months, it’s a good idea to do so.
A common belief is that small businesses aren’t subject to compliance requirements that mainly affect larger organisations.
We’ll tell you this now—this can’t be farther from the truth. While it’s the cases from large businesses being non-compliant that make the rounds in the headlines, small businesses still have employer obligations under the law.
In fact, smaller businesses can be more vulnerable because they have fewer internal HR resources or lack a dedicated HR department. Businesses that rely on outdated templates or simply don’t realise how complex awards can be are even more vulnerable.
We find that several industries like hospitality, retail, healthcare, community services, manufacturing, and warehousing are commonly impacted. That said, no industry is immune from risk.
Can employee contracts override awards?
This episode also addressed another common misunderstanding: the relationship between employment contracts and awards.
There is a legal hierarchy that employers have to understand, namely:
An employment contract cannot reduce or undercut award entitlements. Contracts can improve conditions, but they cannot leave employees worse off. It’s why we always warn against generic employment contract templates.
Generic contract templates create serious risk for businesses. If a business uses a contract that references outdated rates, fails to address overtime properly, has unclear salary clauses, or does not accurately reflect how remuneration is structured, they can be liable for serious consequences.
A compliant employment contract should align with the business’s operations, award obligations, and remuneration structures.
As Paul noted, “You can’t contract out of compliance.”
Most underpayments are not deliberate. In real-life scenarios, we’ve seen them happen because employers don’t fully understand award obligations, rely on outdated advice, or underestimate how complex compliance requirements can be.
We’ve also seen cases where a business grew rapidly in a short amount of time, leading to issues, especially when operational demands overtake internal HR or payroll capability.
Unintentional or not, underpayment carries serious consequences. With underpayments now facing greater scrutiny (in January 2025, Fair Work deemed the intentional underpayment of employees as a criminal offence under the Fair Work Act), businesses can’t afford to treat compliance as an afterthought.
There are several key steps that employers should prioritse, namely:
The advice we always have? Don’t wait until a problem crops up. As the saying goes, prevention is better than a cure. In this case, prevention is much easier and less financially costly than fixing errors afterwards.
Pay compliance isn’t just an admin task. Getting it wrong can mean serious consequences for businesses.
Proactively reviewing your pay structures and employment obligations, especially when relevant updates come up, means you’re in a much better position than if you don’t.
Staying compliant isn’t a tick-and-flick exercise, especially with the ever-changing employment law landscape. Pay compliance requires ongoing review, clear processes, and if needed, seeking expert advice.
At Now Actually, we help businesses with Modern Award interpretation, employment contracts, payroll compliance, and more. If you’re unsure whether your current setup is compliant, now is the time to review it. Reach out to us if you need people-first HR support. Get in touch with us.
