Payroll Compliance Audit Checklist

Why self-audit at all

Almost every payroll underpayment story starts the same way: not with malice, but with a setting that was right five years ago and never revisited. Award rates moved, an employee's duties changed, a system default stayed on. A periodic self-audit — annually at minimum, and after any award or system change — catches the drift while it's still small and fixable.

Work through the five areas below. For each employee you check, keep a note of what you verified and against what source; that record is itself valuable evidence of good faith.

1. Classification and instruments

• Confirm which award or enterprise agreement covers each employee — or that they're genuinely award-free. "We pay above award" is not the same as "no award applies".
• Check each employee's classification level against their actual duties, not their job title. Duties creep upward over time; classifications rarely follow automatically.
• Review employment types: full-time, part-time, casual, fixed-term. Casuals engaged on regular patterns raise conversion questions — the Fair Work Ombudsman sets out the current rules.
• Check any annualised salary or set-off arrangements do what you think they do. Many awards require reconciliation against what the employee would have earned on award terms — a step that's often skipped.

2. Rates, penalties and allowances

• Verify base rates against the current award rates published by the Fair Work Ombudsman — they're adjusted periodically, and last year's compliant rate can be this year's underpayment.
• Test penalty rates and overtime on real rosters. Pick a few actual pay periods with weekend, evening or overtime work and recalculate them manually against the award.
• Check allowances: tools, travel, meals, uniforms, first aid — small per-shift amounts that compound into large back-pay when missed for years.
• Confirm leave loading and public holiday treatment match the applicable instrument.

3. Superannuation

• Confirm super is calculated on the right earnings base (ordinary time earnings, as the ATO defines it) at the current rate the ATO publishes.
• Check payments actually reached each fund by the deadline. The rules on payment timing are tightening — payday-based super is the direction of travel — so verify the current requirements rather than relying on old habits.
• Reconcile super payable in your ledger against what cleared, and investigate any residual balance. Unpaid super attracts a harsh charge regime with no discretion for "we forgot".

4. Records, payslips and reporting

• Sample payslips against the Fair Work requirements — issue timing and required contents are prescribed, and payslip breaches are among the easiest for an inspector to find.
• Confirm employee records are complete and kept for the required period: hours, leave, super, termination details.
• Reconcile Single Touch Payroll submissions to your payroll register for a sample of pay runs — what the ATO has been told should match what you actually paid.
• Check leave balances are accruing correctly, especially for part-timers and anyone whose hours changed mid-year.

5. Fix what you find

• Quantify any underpayment across the full affected period, not just the current year — then get advice on back-payment, super catch-up and disclosure obligations before acting.
• Fix the root cause in the system: update the rate table, correct the classification, change the default.
• Diarise the next audit and assign an owner, so this becomes a rhythm rather than a one-off panic.

Beyond the audit

If this checklist feels like a lot for one owner to carry alongside everything else — it is. Payroll is where the compliance load on small businesses concentrates hardest, and it's a core part of what our people services handle as a managed rhythm. Workplace law is genuinely complex and fact-specific, so where this audit surfaces anything material, confirm the position with the Fair Work Ombudsman, the ATO or an employment adviser before you act.