The Fair Work Ombudsman unveils comprehensive Payroll Remediation Program Guide

When the Fair Work Ombudsman (FWO) decides whether to take compliance or enforcement action against an employer that has underpaid its employees, it will look at the steps the employer has taken to remediate the underpayment, i.e. repay the amounts underpaid to existing and former employees as promptly as possible, with interest if appropriate.

In April 2025, the FWO issued a guide to employers in designing and implementing a payroll remediation program (PRP), the Payroll Remediation Program Guide. This is a useful insight into what the FWO considers is the most appropriate approach to remediation. If an employer follows this guide, consults effectively with their workforce about the PRP, and is transparent and cooperative with the FWO, it should avoid compliance and enforcement action by the FWO.

The Guide outlines several key elements for establishing an effective program:

#1 Designing your PRP

You should draw on a wide range of information and expertise to identify potential compliance issues. The minimum review period is the past 6 years. If the review period is shorter, the FWO will expect an explanation for this approach. Similarly, if the review period is 6 years, the FWO will expect a reason for this, other than reference to the fact that legal proceedings cannot deal with contraventions that are more than 6 years old. The reasons might be, for example, absence of records or key witnesses not being available.

#2 Common methodology issues

The FWO will seek to understand the methodology used in conducting the PRP. This includes which terms of the relevant industrial instruments were applied or excluded, the rationale behind these decisions, and how certain terms were interpreted in the calculation process. This also involves employee classifications. A comprehensive role-mapping process is recommended to ensure that job classifications accurately reflect evolving work requirements and changes in roles.

The FWO reinforced its view that employers must comply with payment obligations for each individual pay period. Overpayments in one period cannot be used to compensate for underpayments in another, and exceeding the minimum entitlement in one category does not offset a shortfall in another. This position has not yet been the subject of judicial consideration.

#3 Communication with employees

The FWO emphasises the need for a clear and detailed communication strategy. This should be carefully tailored to the audience, typically including all current and former employees. It should specify the timing of communications (ideally as early as possible), outline the communication channels to be used, ensure transparency and provide accessible avenues for enquiries.

#4 Making payments to employees

The FWO expects that back payments place employees in the position they would have been had the underpayments not occurred. These payments should include interest, which, while not legally required, is considered good practice.

#5 Locating former employees and dealing with outstanding payments

The Guide states that employers are expected to take all reasonable steps to locate and pay former employees who are owed entitlements. What constitutes reasonable will depend on factors such as the number of employees affected, the amount of money owed, the size and resources of the business, and the steps already taken. Generally, employers should make repeated efforts to contact former employees using multiple methods.

#6 Corrective measures

Employers should act promptly to prevent further underpayments or adverse impacts on employees. Where longer-term solutions require planning, such as new systems, procurement or third-party dependencies, interim measures should be introduced. These may include management or process controls, manual reconciliations or additional payments to reduce the risk of further non-compliance. Failing to take reasonable steps while conducting a PRP could result in serious breaches of the Fair Work Act 2009 (Cth).

#7 Ensuring future compliance

Employers should implement prompt and effective measures to prevent further underpayments and ensure ongoing compliance. The FWO highlights the importance of establishing systems and processes that promote payroll accuracy and reduce future risk.

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