Fair work compliance and your employer obligations under the Fair Work Act

Most small business owners never set out to underpay their staff. But under the Fair Work Act 2009 (Cth) (the Act), a breach does not need intention: you can owe an employee wages, leave and super simply because the wrong award was applied, a classification was missed, or a record was never kept. The obligations attach the moment your first employee starts, and the agency that checks on them, the Fair Work Ombudsman (FWO), has a wider range of enforcement tools than ever.

This guide sets out the core Fair Work obligations Australian employers carry, who they apply to, the records and payslips the law requires, and what happens if the FWO finds a problem. It is written for the small and medium business operator, not the lawyer, so it focuses on what you actually need to do and the deadlines that come with it.

Who the obligations apply to

The Act covers national system employers. That includes constitutional corporations (most companies) and, through state and territory referral arrangements, nearly every other private sector employer in Australia. In practical terms, if your business employs staff in Australia, the chances are overwhelming that the Act applies to you, however small you are. One part-time employee is enough to trigger the obligations below.

Two scope points matter from the start:

Small business status: your business is a small business under the Act if it has fewer than 15 employees (counting casuals employed on a regular and systematic basis). Small business status affects things like unfair dismissal exposure, but it does not reduce your core obligation to pay correctly and keep records.
Not everything is Fair Work: the FWO regulates pay and conditions. Work health and safety is enforced separately by state and territory regulators such as SafeWork NSW and WorkSafe Victoria, and the Fair Work Commission, a separate body, handles unfair dismissal, general protections and enterprise bargaining disputes. Getting the wrong regulator's expectations mixed up is a common source of confusion.

The FWO itself is established under the Act at s 696, and its functions at s 682 are to promote compliance through education and advice, monitor compliance, investigate suspected breaches, and commence proceedings in court. In other words, it is both your free helpdesk and your inspector, which is why the paperwork matters even when everything seems fine.

Pay the correct rate under the correct award

The foundation of Fair Work compliance is getting the rate right. Most employees in Australia are covered by a modern award, which sets the minimum hourly rate, penalty rates, loadings and allowances for a particular industry or occupation. Above that floor sits the National Employment Standards (NES), the ten minimum conditions in Part 2-2 of the Act that apply to every national system employee, covering maximum weekly hours, leave entitlements, notice of termination and the rest.

Getting this right involves two separate questions that are often confused:

Which award applies: the right award depends on what the business actually does and what the employee actually does, not the job title you gave them. Covering a worker under the wrong award is one of the most common causes of underpayment claims.
What classification applies: every award divides roles into levels or grades, each with its own rate. A "casual retail assistant" might be a level 1 or level 3 employee depending on duties and experience, and the difference can be several dollars an hour.

Award rates are reviewed each year by the Fair Work Commission and usually increase from 1 July, so last year's payroll settings may already be out of date. Build the award into your payroll and rostering from day one, and treat classification as something to check rather than assume. The FWO publishes pay guides and tools that show the current rates for each award, which is the cheapest first step when you are unsure.

Pay superannuation on ordinary time earnings

Superannuation guarantee (SG) is a separate obligation, enforced by the Australian Taxation Office rather than the FWO, but it is part of the same compliance picture because unpaid super is a frequent finding in audits. Two details matter:

Rate: the SG rate is 12% of ordinary time earnings from 1 July 2025, confirmed by the ATO. Ordinary time earnings are what the employee earns for their ordinary hours, including most allowances and commissions, but not overtime.
When to pay: super is currently due quarterly, within 28 days after the end of each quarter. From 1 July 2026, the new Payday Super rules require you to pay SG each payday alongside wages, so it is worth setting up the payroll to calculate super per pay period now rather than retrofitting it later.

If SG is not paid on time, the ATO can impose the super guarantee charge, which is designed to be more expensive than paying the super itself. Because wages and super are enforced by different agencies, an FWO audit can hand findings across to the ATO and vice versa, so a gap in either system tends to surface eventually.

Keep employee records for seven years

s 535 of the Act requires you to make and keep employee records for each employee, and to keep them for seven years. The regulations spell out what they must contain, including the employee's name, employment type, start date, pay rates, gross and net amounts paid, hours worked for hourly employees, leave balances and super contributions. Records must also be legible and readily accessible to an inspector.

The seven year retention period is longer than most business owners assume, and it runs from the date the record is made, not from when the employee leaves. If you inherited a business or changed payroll systems, check that records from previous periods are still reachable.

Here is why this duty matters more than it looks. If your records are missing or inaccurate and an employee later alleges underpayment, s 557C of the Act reverses the burden of proof: you carry the burden of disproving the allegation, because the records that would prove what happened were your responsibility to keep. An employer who actually paid correctly can still lose, or settle, purely because the records are gone.

Issue compliant payslips within one working day

s 536 of the Act requires a payslip to be given to each employee within one working day of paying them. It is not enough to pay on time; the payslip must also carry the content set out in regulation 3.46 of the Fair Work Regulations 2009 (Cth):

the employer's and employee's names;
the period the pay covers and the date payment was made;
the gross and net amounts of the payment;
any bonus, loading, allowance, penalty rate or other separately identifiable entitlement;
any deductions and where they were paid; and
for hourly employees, the hourly rate and the number of hours at that rate.

Most modern payroll software produces compliant payslips automatically, but the settings must be right. A payslip that does not separately identify penalty rates and allowances is non-compliant even if the total is correct. The one working day deadline is strict, and late or missing payslips are one of the most common infringement notice targets for the FWO.

Hand over the Fair Work Information Statement

On top of records and payslips, s 125 of the Act requires you to give every new employee the Fair Work Information Statement, the plain English summary of the NES, awards and workplace rights that the FWO publishes, before or as soon as practicable after they start. It is only required once in any 12 month period, so casuals who return to you do not need a new copy each engagement. It is a small step, but it is a civil remedy provision, meaning a breach is enforceable in its own right, and it is easy to miss in a busy onboarding.

Put the basics in writing

Beyond the strict statutory duties, written employment contracts and workplace policies are the practical layer that keeps disputes out of court. A contract should cover hours, pay, duties, leave, notice and termination and should be consistent with the award and the NES. Policies on conduct, leave, harassment and grievances give you something concrete to point to when an issue arises. Neither replaces an award, but both reduce the ambiguity that underpayment and dismissal disputes feed on. A lawyer's role here is to draft documents that match the actual award coverage and the way your business engages people, rather than copying a template that may not fit.

What happens if you get it wrong

The FWO's enforcement approach is a ladder, and most businesses encounter the lower rungs before anything serious:

Education and audits: the FWO runs proactive audits across industries and follows up requests for assistance from employees. Fair Work inspectors can enter workplaces, require records to be produced and interview people. An audit typically starts with a request for payslips, time records, contracts and rosters.
Compliance notices: under s 716 of the Act, an inspector can issue a compliance notice requiring you to fix a contravention, for example by back-paying wages. s 715 allows the FWO to accept a voluntary enforceable undertaking instead, a public commitment to fix the problem and change practices.
Infringement notices: for certain contraventions such as record keeping and payslip failures, the FWO can issue an infringement notice with a fixed fine, which avoids court entirely if paid.
Court proceedings: for more serious matters, the FWO can start proceedings in the Federal Court or Federal Circuit and Family Court. Courts can order back-pay with interest and impose civil penalties per contravention.

Civil penalties are calculated in penalty units, currently valued at $330 each. Most breaches of the NES, for example, carry a maximum of 60 penalty units per contravention for an individual (about $19,800) and 300 units for a company (about $99,000), with companies facing five times the individual maximum under s 546 of the Act. "Serious contraventions", where the breach was knowing or reckless, carry ten times the ordinary maximum, and the 2024 Closing Loopholes reforms raised the figures further for underpayment contraventions by larger companies.

The most significant change is criminal. Since 1 January 2025, intentionally failing to pay amounts owed to employees is a criminal offence under s 327A of the Act, with penalties of up to ten years imprisonment for individuals and fines set at the greater of three times the underpayment or 5,000 penalty units (about $1.65 million), and up to 25,000 penalty units for companies (about $8.25 million). The FWO has explained the criminalisation of wage underpayments in detail. Intent is required for the criminal offence, and it is aimed at deliberate non-payment rather than honest mistakes, but the line between "we made an error" and "we ignored it" is exactly the kind of judgment a lawyer should help you make if you discover a shortfall.

Finally, liability is not confined to the company. People who are knowingly involved in a contravention, including directors and managers who sign off on payroll decisions, can face penalties in their own right under the Act's accessorial liability provisions.

A practical compliance checklist

Work through this list at least once a year, and again whenever a role or award changes:

Confirm the correct modern award and classification for every role, and review classifications when duties change.
Pay at or above the award or agreement rate, including penalties, loadings and allowances, and update payroll when rates change each July.
Pay super at 12% of ordinary time earnings, and prepare for Payday Super from 1 July 2026.
Keep employee records for seven years, legible and readily accessible.
Issue payslips within one working day with all required content.
Give new employees the Fair Work Information Statement.
Run a self-audit at least annually, spot checking rates, classifications, rosters and payslips against the current award.
If you find an underpayment, calculate it fully and back-pay promptly, then fix the system that caused it.

Where a lawyer helps

A lawyer adds the most value at the points where the cost of getting it wrong is highest: interpreting award coverage and classifications for unusual roles, drafting contracts and policies that match your actual arrangements, responding to an FWO audit or compliance notice, and calculating and correcting an underpayment before it becomes an investigation. If you discover a shortfall, advice on how to disclose and correct it can be the difference between a back-payment exercise and a criminal referral, so that is not a moment to work from a search engine.

The records you keep decide who carries the burden

The single most underrated obligation in this list is the seven year record keeping duty, because it quietly decides who has to prove what. Miss a record and the burden of disproving an underpayment claim shifts to you; keep it properly and the same claim usually collapses at the first request for documents. With wage underpayments now a criminal matter where the conduct is deliberate, the cost of sloppy records is no longer just a penalty, it is the difference between a dispute you can close out with a pay guide and one that follows you for years. If you do one thing this week, pull the current pay run for your most junior employee and check their rate, their classification and their payslip against the award. That one check will tell you whether the rest of the system is likely to hold up.