Australian company directors are subject to penalties under the Closing Loopholes Acts. Yellow Canary’s 2025 State of Payroll Compliance Report reveals how businesses are coping.
Presented by Yellow Canary
The Fair Work Legislation Amendment (Closing Loopholes) Act 2023 and the Fair Work Legislation Amendment (Closing Loopholes No.2) Act 2024 have introduced significant changes to Australian workplace laws, marking a new era of heightened compliance.
From 1 January 2025, employers — and their directors — who intentionally underpay employees could face criminal charges under the new wage theft laws, while civil penalties for underpayments have also increased.
For individuals, the maximum penalties include fines, imprisonment of up to 10 years, or both, and businesses could face fines in the millions of dollars. Notably, while criminal penalties target intentional acts, the civil penalties now apply even to unintentional breaches.
“It is concerning so many businesses are unsure about their compliance status,” says Marcus Zeltzer, founder and managing director of Yellow Canary. “When you combine this uncertainty with evolving laws and increased administrative demands, we are likely to continue seeing underpayment issues in the headlines.”
Yellow Canary’s 2025 State of Payroll Compliance Report highlights this concern, with 42 per cent of Australian businesses particularly worried about personal liability and financial risks under the new legislation.
The report also reveals that 19 per cent of businesses suspect underpayments, but have not yet confirmed them, while 17 per cent remain uncertain about whether they are paying employees correctly.
What steps can directors take to ensure payroll compliance?
To navigate these changes, directors must champion a compliance-first culture, starting with a robust governance framework that embeds payroll compliance across all levels of the organisation. This involves encouraging management to actively engage employees, educate them about their pay entitlements and empower them to report potential discrepancies confidently.
Equally vital is the establishment of a clear underpayment response plan. A well-documented protocol ensures swift and effective action when compliance breaches occur, minimising the risk of escalation and maintaining trust.
Addressing the root causes of underpayments is another critical step. Conducting thorough root-cause analyses can uncover systemic issues, such as outdated systems, insufficient training or misinterpretations of complex industrial agreements — all of which can contribute to payroll inaccuracies.
Real-time monitoring enables early detection and resolution of issues before they escalate. Directors should advocate for investment in automated tools like Yellow Canary’s payroll compliance platform, which provides continuous payroll audits, detailed reporting and actionable dashboards, equipping management with the insights needed to detect and correct discrepancies proactively.
“Payroll errors are rarely sudden — they build over time from systemic issues left unaddressed,” says Zeltzer.
“Underpayments typically amount to one to three per cent of total payroll, highlighting a persistent need to address hidden risks.”
With heightened scrutiny around underpayment cases, directors have an opportunity to lead confidently by actively assessing and continuously enhancing their business’ payroll compliance. By embedding proactive measures into the compliance framework, directors can build trust, strengthen operational resilience and safeguard both their business and personal reputation, while minimising long-term risks.
See how you compare: Download the 2025 State of Payroll Compliance Report HERE.
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