What Happens If You Get a Wage Audit Wrong? A Guide for Australian SMEs

For small and medium-sized enterprises (SMEs) in Australia, a wage audit is no longer optional — it’s a compliance expectation. But what happens if you get it wrong?

With wage theft laws now in effect, and increased scrutiny from the Fair Work Ombudsman, getting payroll wrong can lead to serious legal, financial, and reputational consequences. In this article, we break down exactly what can go wrong during a wage audit, what penalties apply, and what SME owners need to know to stay compliant.

Why Wage Audits Matter More Than Ever in 2025

In 2025, Australian employment law is more complex — and more enforceable — than ever. Wage audits are now a core part of business compliance, especially with:

• Wage theft criminalisation
• Expanded casual conversion rules
• Superannuation reforms (e.g., real-time payments and super on Paid Parental Leave)
• Tougher recordkeeping and STP reporting requirements

Fair Work inspectors are ramping up audits in high-risk sectors like hospitality, retail, construction, healthcare, and tech startups. And with increasing employee awareness of their entitlements, mistakes are no longer going unnoticed.

The Consequences of Failing a Wage Audit

1. Financial Penalties and Back Pay

If a wage audit reveals underpayment, you may be required to:

• Back pay employees the full amount owed (often with interest)
• Pay penalty units per breach — up to $18,780 per contravention for individuals and $93,900 for companies
• Face multiple penalties for repeated or systemic failures (e.g. misclassifying casuals across your entire team)

Small businesses can quickly find themselves facing five- or six-figure liabilities — even if the mistake was unintentional.

2. Criminal Charges Under Wage Theft Laws

From January 2025, intentional wage underpayment is a criminal offence. Directors and business owners can be personally liable if it’s proven they:

• Knew about the underpayments
• Failed to take corrective action
• Attempted to conceal or ignore the issue

Penalties can include:

• Criminal charges
• Court-imposed fines
• Disqualification from managing corporations
• In serious cases, imprisonment

This puts a heavy burden on directors and leadership teams to ensure accurate and transparent payroll processes.

3. Reputational Damage

Failing a wage audit doesn’t just affect your finances — it can severely harm your brand:

• Negative media coverage
• Damaged trust with staff and customers
• Increased employee churn or union action
• Loss of tenders, funding, or business partnerships

In a tight labour market, even small compliance breaches can turn into major reputation risks.

Common Reasons SMEs Fail Wage Audits

Even well-intentioned businesses can get caught out. The most common causes of wage audit failures include:

• Incorrect award interpretation or outdated pay rates
• Misclassifying employees as casuals or contractors
• Missing allowances, overtime, or leave loading
• Failing to pay superannuation correctly or on time
• Incomplete or inaccurate recordkeeping
• Relying on spreadsheets or manual systems instead of audit-ready payroll software

These issues are especially common in SMEs without dedicated HR or legal teams — but ignorance is no defence under Australian law.

How to Protect Your Business From Wage Audit Risk

1. Conduct Proactive Internal Wage Audits

Don’t wait for Fair Work to come knocking. Use the start of the financial year, or quarterly BAS periods, as triggers to run internal wage audits.

2. Use Award-Integrated Payroll Software

Platforms like Employment Hero, Ascender, ELMO, and ADP help automate compliance by:

• Updating modern award rates
• Calculating overtime and leave loading correctly
• Alerting you to anomalies in time and pay data
• Generating STP and audit-ready reports

3. Review Employee Contracts and Classifications

Ensure all contracts align with actual work patterns and Fair Work definitions. Pay close attention to:

• Casual conversion rules
• Minimum engagement periods
• Public holiday and weekend rates
• Super on bonuses and allowances

4. Train Your Payroll and Finance Teams

Keep your internal staff up to date with:

• Wage theft legislation
• Modern award updates
• New financial year compliance requirements
• Tools and best practices for payroll audits

Education is key — especially in SMEs where team members wear multiple hats.

When to Seek Professional Help

If you’ve never done a wage audit or suspect your systems aren’t compliant, it’s wise to engage:

• A wage compliance consultant
• A specialist employment lawyer
• A Fair Work expert (many accounting firms now offer this)
• Or a platform like Subi, which helps automate wage audit workflows end-to-end

A proactive approach can often reduce liability and even secure leniency in the event of an audit.

Final Word: Don’t Risk Getting It Wrong

Wage audits are no longer optional — and the risks of getting them wrong are real. From criminal charges to financial penalties and reputational fallout, the consequences can cripple an otherwise healthy business.

But there’s good news: with the right tools, systems, and awareness, wage audit compliance is entirely achievable — even for small teams.

In 2025, Australian SMEs have a clear choice: treat compliance as a burden, or treat it as an opportunity to build a more resilient, transparent, and trusted business.

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