Australia Releases New Guide to Help Prevent Employee Underpayments

On 1 May 2025, the Australian Fair Work Ombudsman (FWO) released its new Payroll Remediation Program (PRP) guide to help employers and their representatives identify, prevent, and correct employee underpayments under the Fair Work Act.

The PRP guide addresses the increase in self-reported compliance issues (resulting in employee underpayments) observed by the FWO and responds to union representatives' requests for guidance. Though Australia-specific, the guide is a benchmark for payroll functions worldwide facing compliance challenges.

A Model Program: Principles in Practice

The PRP guide is built around 10 core principles, with a strong focus on fairness, transparency, and employee-centred practices. Employers are expected to investigate and quantify issues thoroughly, communicate with transparency and urgency, and ensure repayments, including interest, while also strengthening future compliance frameworks. Key features of a well-structured PRP include:

• Thorough diagnosis and risk assessment. Employers must understand the breadth and root causes of noncompliance using tools such as data analytics, sample testing, and cross-functional audits.
• Robust methodology. Employers must apply industrial instruments correctly and resolve record or reporting gaps using employee-beneficial assumptions, rather than generic estimations.
• Employee-centric communication. Clear, early, and ongoing communication with affected employees is essential. Employers must also provide simple and accessible channels for employees to review or challenge outcomes.
• Transparent governance. Senior leaders must take ownership of remediation and regularly report to executive teams or boards. Given the complexity of the task, support from those with workplace relations expertise (including professional third-party advice from advisors with experience in PRPs, auditing, and/or legal advice) is needed.
• Corrective and future-proofing measures. Underpayments should be repaid promptly and with interest, even if not legally required, as a demonstration of accountability and good faith.

Lastly, the PRP guide encourages preventative action through regular audits, reconciliations, clear compliance ownership, strong governance, employee training, and robust role classification. The framework is scalable to organisations of all sizes.

Implications Beyond Australia

Australia was ranked number 11 in countries that are challenging to pay employees in PAYO’s published “Getting the World Paid Survey Report” as part of 2025 Global Payroll Week, and the overall top challenge in global payroll was ensuring local compliance. Usually, payroll represents the largest cost for any organisation so this drives the need for compliant payroll results that avoid penalties.

The PRP guide offers practical and actionable insights, and payroll professionals globally are encouraged to download, review, and adapt the recommendations to their local contexts. Suggested actions include:

• Reviewing your organisation’s global payroll compliance landscape, mapping all applicable local legislative requirements, potentially in consultation with HR, legal, and payroll provider(s).
• Conducting audits to assess current compliance and identify gaps, including possible corrective actions.
• Collaborating with HR to develop a communications strategy for managing underpayments, ensuring employee trust is maintained regardless of root cause.
• Engaging with Finance to align overpayment correction processes with local rules (e.g., on-cycle vs. prior-cycle adjustments, gross-ups).
• Establishing continuous monitoring programs to remain compliant in a fast-changing regulatory environment.

Final Thought

In a world where payroll mistakes can make headlines, the FWO’s PRP guide is both timely and globally relevant. For global payroll professionals, it is not just a tool for Australia, but a reminder that sound practices to prevent and correct compliance issues are essential.

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Max van der Klis-Busink, MCIPP, RPP, is the Owner of Passion For Payroll and Vice President of Global Strategy on PayrollOrg’s Board of Directors.