Fair Work Ombudsman recovers $95 million more in back pay as HR faces payroll compliance scrutiny

Australian employment lawyers are urging HR teams to review payroll systems, employee records and workplace reporting processes after the Fair Work Ombudsman (FWO) reported a sharp rise in complaints and wage recoveries. 

The workplace regulator's 2025–26 annual report revealed that it received 23% more tip-offs than in the previous financial year.

While workers received around $95 million more in back payments, as reported by HR leaders. The findings point to growing scrutiny of employers' compliance with workplace laws and employee pay obligations.

The regulator's investigations uncovered several cases of workplace compliance failures, including problems with employee records and payslips.

At UNSW, the FWO identified systemic record-keeping and payslip breaches as part of its investigation into underpayments.

The regulator also took action across industries with a history of wage compliance issues. 

In the fast-food, restaurant and cafe sector, it recovered more than $5.6 million for 3,538 workers and commenced 16 legal proceedings against employers.

The building and construction industry also came under scrutiny, with more than $6.8 million recovered for workers.

The Construction, Forestry and Maritime Employees Union and four of its Victorian officials also received penalties during the reporting period.

Cilla Robinson, partner in the employment relations and safety team at Mallesons, said the latest figures should prompt employers to review their payroll and workplace compliance practices.

She said the increase in reports suggests employees are becoming more aware of their workplace rights and are increasingly approaching regulators when they believe employers are not following the law.

“employees are better informed and increasingly willing to report non-compliance, often to the regulator rather than internally … that often signals a trust gap in workplace culture”.

Robinson said employers could face significant financial consequences, with civil penalties for larger employers potentially reaching three times the amount of an underpayment.

She also pointed to the regulator's 60 litigation cases and 791 infringement notices as signs that enforcement risks remain high.

To reduce the risk of non-compliance, Robinson advised HR teams to begin with a detailed payroll audit.

She said, “Map every role to its award classification and test a sample of rosters and timesheets against payroll for penalty rates, overtime and allowances. Then spot-check pay slips and records against regulatory requirements. Reconcile payroll after every rate change.”

She also encouraged employers to establish safe internal reporting channels outside employees' direct management teams. This would allow workers to raise concerns without fearing unfair treatment or negative consequences.

Fair Work Ombudsman Anna Booth also stressed that compliance with workplace laws must remain a priority for employers, including large organisations.

“For all employers, including large corporates, the Fair Work Ombudsman expects a high priority to be placed on following workplace laws.”

Robinson further warned that poor payroll and record-keeping practices could create legal and reputational risks for businesses.

“Failures can reverse the burden of proof. Reputational damage often follows.”

The latest findings underline the importance of accurate payroll processing, proper employee records and accessible reporting channels. 

For HR teams, regular audits and timely corrections could help prevent underpayments from developing into larger legal and financial issues.