Thousands of Underpaid Employees Across Australian Universities Due To Mounting Payroll Compliance Crisis

Several Australian universities have recently taken responsibility for thousands of underpaid employees, with issues ranging from payroll discrepancies and award misclassification to poor documentation of processes. Higher education institutions have recently entered into an Enforceable Undertaking (EUs) with the Fair Work Ombudsman to address these systemic problems.

Understanding Enforceable Undertakings

An Enforceable Undertaking represents a formal commitment made by an organisation to rectify non-compliance and meet all relevant obligations under Australian workplace laws. It signals a proactive approach to addressing past mistakes and implementing measures to prevent future breaches—particularly important with cases involving underpaid employees.

The Widening Scope of University Underpayments

When our experts examined the underpayment issues within universities, the most common payroll mistakes included differing practices leading to systemic failures, compliance blind spots, and a general lack of governance over payroll processes.

Universities that entered into Enforceable Undertakings consistently reported inaccurate record-keeping practices that created fundamental gaps in tracking both hours worked and correct pay rates. Many cases also involved incorrectly applied Enterprise Agreements, which meant employees were not properly compensated for their actual hours worked.

These observations reveal a critical gap in ensuring payroll compliance – inadequate training that fails to build employees’ skills in implementing lawful pay practices and understanding workplace compliance requirements.

Even the recent Fair Work Ombudsman cases show that universities have consistently self-reported underpayments stemming from outdated payroll systems. Additionally, the lack of automation combined with systems that fail to accommodate the highly nuanced nature of academic work arrangements has been detrimental for thousands of underpaid employees.

The Broader Impact?  These systemic issues made it challenging to track the existence of underpaid employees effectively and continued to persist unchecked for years.

The cases highlight the sheer scale of the issue and the urgent need for robust, compliant payroll practices throughout Australia’s higher education institutions.

Road to Compliance: Universities Committed To Rectify These Common Payroll Errors

While news around companies underpaying employees is becoming more and more prominent, the FWO acknowledges organisations that are proactive with implementing corrective measures to rectify underpayments.

Some universities have committed to implementing a range of corrective measures that include updating payroll and record-keeping systems, and relaying information to the FWO about future compliance practices.

Furthermore, the universities have also agreed to maintain robust mechanisms for handling payment-related complaints and roll out university-wide training to ensure matters of workplace relations compliance is maintained. These universities will prioritise and embed within its governing council the monitoring of compliance with Fair Work industrial instruments, ensuring accountability at the highest levels.

To ensure transparency, the universities have also committed to inform employees of the EU through multiple internal channels including all-staff email and written notice to affected employees.

Important Lessons For Australian Employers Underpaying Employees

With deliberate wage thefts now criminalised, it’s more important than ever for employers to take full responsibility in assessing payroll systems, current wage-related practices, and if underpaid employees are slipping through the gaps. Organisations must be proactive in rectifying potential underpayments and avoiding non-compliance throughout their operations.

Actionable Steps for Employers

Here are four actions recommended by our payroll experts to ensure future compliance:

1. Immediate Assessment and Review

The Modern Award system is a highly complex subject, which needs expert handling.

Our experts often advise businesses to seek out independent payroll specialists to review current systems and practices against applicable awards and enterprise agreements. This first step proves to be effective when conducting a thorough payroll audit to identify potential underpayment risks across all employee categories and award classifications.

1. Internal Systems and Process Enhancement

The next area to cater to is around developing and implementing robust payroll governance frameworks that include automated compliance checks and regular reconciliation processes. By engaging payroll experts, it simplifies the process to establish clear documentation for all payroll decisions and ensure adequate training for payroll staff and frontline managers.

1. Proactive Compliance Monitoring and Reporting

Once an audit has been completed and policies and procedures have been established, it’s important to have ongoing monitoring mechanisms as an apparent part of the business. This includes regular internal audits, employee feedback channels, and systematic reviews of award interpretation.

Organisations should also establish clear escalation pathways for addressing potential compliance issues before they become systemic problems.

1. Strategic Risk Management

As a final step, it’s critical to embed payroll compliance oversight at executive and board levels, ensuring adequate resources are allocated to maintain compliant payroll practices. Consider implementing automated solutions that reduce manual processing errors and provide real-time compliance monitoring capabilities.

The recent FWO cases are a good reminder that proactive self-reporting and comprehensive remediation can help organisations manage regulatory relationships while addressing employee concerns effectively.

Where to next?

Setting up your business to succeed in wage and payroll compliance is not just paramount but non-negotiable in today’s heavily regulated landscape. However, you don’t need to handle this on your own.

Our workplace relations specialists can provide continuous support to your payroll teams, from identifying common payroll mistakes, compliance training across all levels to establishing early escalation processes.

Book a confidential chat with our team to discuss your compliance challenges.