The Fair Work Ombudsman (FWO) announced in September 2026 that it had recovered over $450 million in underpayments between 2025-2026. The FWO’s efforts led to 181,000 workers in Australia recovering unpaid wages and entitlements.
The FWO’s targeted focus on certain industries led to an increase in recovered amounts of approximately $95 million from the previous year. Large corporate sector employers were responsible for approximately $217.3 million in underpayments in 2025-2026, accounting for almost half of the total amount recovered by the FWO.
Not just the big names
The FWO is proactively scrutinising disability support service providers through its ongoing Disability Support Services Inquiry, seeking to understand why the industry experiences compliance issues. In 2025-26, the FWO recovered close to $24 million from disability service providers, resulting in over 10,500 sector workers receiving additional payments.
A not-for-profit disability services provider in Melbourne and regional Victoria recently entered into an Enforceable Undertaking with the FWO, after remedying approximately $2.5 million in underpayments. One query from a casual employee regarding their loading entitlements led to a comprehensive audit, which ultimately uncovered approximately six years of underpayments to over 1,300 staff.
Most of the staff impacted were casual disability support workers who were not paid certain entitlements, such as casual loading and overtime rates. Some part-time and full-time workers were also underpaid. Ultimately, the provider failed to ensure it understood and was compliant with obligations under its enterprise agreement, including the applicable modern award.
Many disability service providers, including not-for-profit organisations, manage casual, rostered workforces with layered entitlements, while operating with more limited resources and funding than large corporate employers. In that context, a single misapplied entitlement can compound over several years.
All employers must be aware of the complicated entitlements that their employees may have, whether it be under a modern award, an enterprise agreement or their own employment contracts. Remediating these types of errors is essential, but doing so years down the track can take significant time, money and resources that would otherwise be available for other business priorities.
The building and construction sector is also under scrutiny with underpayment recoveries exceeding $6.8 million and restitution payments being made to almost 950 workers in 2025-26.
To date, the FWO’s focus has been on industries that have fallen short in respect of acknowledging and paying entitlements accurately in the past, or that are known for some form of underpayment. Often these industries experience difficulties with award interpretation, particularly where awards contain complex classification systems and other entitlements.
FWO is increasing its enforcement activities and businesses are being proactive with audits
An increase in proactive investigations undertaken by the FWO has facilitated a stark increase in the quantum of monies recovered. In 2025-26, investigations resulted in additional payments to almost 14,000 workers. These investigations are aided by targeted campaigns and inquiries undertaken by the FWO to identify and address large-scale, non-compliance in certain industries.
Although some industries have been named and shamed when it comes to underpayments, this does not mean other sectors can afford to be complacent. No matter the size of a business, administering payroll with accuracy and a fundamental understanding of legal obligations is paramount in ensuring that employees are properly compensated. This is particularly the case for employers with complicated industrial frameworks, such as multiple modern awards applying to different staff or ambiguous enterprise agreements.
Reducing your enterprise risk
To minimise risk, businesses should:
- review pay obligations regularly: ensure these are fully understood, irrespective of whether they are contained in employment contracts, enterprise agreements or modern awards (or a combination of those instruments);
- configure systems to suit business needs: ensure payroll systems automatically update and enforce ever-changing rules and rates (remember you can’t assume all payroll providers will understand modern awards and how they intersect with employment contracts or other industrial instruments. The obligation is on the employer to get this right, and it is not an obligation that can be outsourced);
- keep audit-ready records: ensure all time recording and other records are clearly presentable and easily accessible;
- dedicate resources to payroll expertise and training: ensure the team knows the ins and outs of what is required and provide training where applicable; and
- conduct regular internal reviews and audits: small sample reviews and audits, at a high level, enable a business to determine quickly if there is a payroll-related compliance issue and if systems and processes are functioning properly.
Need help?
Industrial compliance can be complex, and poorly run or inadequate audits can potentially cost you more. For example, if you misinterpret award entitlements and apply the wrong ones, you may end up calculating an underpayment which is much lower (or much higher) than it actually is. The FWO will scrutinise the process followed, and when you’re talking about hundreds of staff involved, the differences can run into the millions of dollars.
Pragma Lawyer’s Employment and Industrial Relations Team is experienced in conducting audits, ascertaining risk and ensuring businesses are meeting their obligations. McGrathNicol’s Payroll Advisory Team assists with identifying risks and improving payroll performance, while also offering wage underpayment investigations, audits and remediation.
We have helped multiple Australian businesses address and successfully mitigate their industrial risks, including advising on large scale pay audits. Working together, our teams can support businesses with both the legal and payroll sides of an audit or remediation.
Authored by Elizabeth McLean, Jeshna Sagun, Suzanna Dunsmore, and Angeline Tavani of Pragma Lawyers and McGrathNicol.
