A recent Fair Work Ombudsman media release has put a major spotlight on payroll compliance, with Southern Cross Care (NSW & ACT) entering into an Enforceable Undertaking after underpaying staff more than $11.7 million.

This case is a strong reminder that even well intentioned organisations can face significant risk when systems, processes and checks are not fit for purpose.

What Happened?

Southern Cross Care, a large not-for-profit aged care provider, identified widespread underpayments affecting approximately 5,500 employees across NSW and the ACT.

The underpayments occurred over a long period, from July 2017 to October 2024, and impacted a wide range of roles including nurses, care workers, and support staff.

The issue was first uncovered after an employee query about overtime triggered a self-audit in 2023.

What Went Wrong?

The root causes were not deliberate misconduct, but systemic failures:

• Incorrect application of enterprise agreement provisions
• Faulty time and attendance systems
• Manual payroll processes that didn’t align with legal requirements
• Miscalculation of overtime, penalties, allowances and leave loadings

This is where many businesses get caught. It’s not always intentional. It’s often a breakdown in systems and oversight.

The Consequences

While Southern Cross Care cooperated and self-reported, the scale of the issue is significant:

• $11.7 million+ in underpayments
• Thousands of affected employees
• Formal regulatory action through an Enforceable Undertaking
• Ongoing obligations including audits, system upgrades, and reporting to the Board

The Fair Work Ombudsman made it clear that failures like this can escalate quickly when employers don’t have appropriate checks in place.

Key Takeaways for Employers

This case highlights some critical lessons:

1. Payroll errors compound quickly

What may start as a small miscalculation can grow into millions over time.

2. Systems matter

Outdated or manual payroll systems are a major risk area, particularly when dealing with awards or enterprise agreements.

3. Awards and agreements are complex

Overtime, penalties and allowances must be applied correctly every time.

4. One question can trigger everything

In this case, a single employee query uncovered years of non-compliance.

5. Self-reporting helps, but doesn’t remove risk

While cooperation can influence outcomes, it doesn’t eliminate the financial or reputational impact.

Why This Matters Right Now

Regulators are increasingly focused on underpayments across multiple industries, especially in sectors with complex pay structures.

The expectation is clear:
Employers must have systems, processes, and checks in place to ensure employees are paid correctly, every time.

How to Protect Your Business

To avoid a situation like this, businesses should:

• Conduct regular payroll audits
• Review award and agreement interpretations
• Ensure systems are fit for purpose
• Train managers and payroll teams
• Seek advice when unsure

Final Thoughts

This isn’t just a large organisation issue.

It’s a reminder that any business, of any size, can get this wrong if the right safeguards aren’t in place.

If you’re unsure whether your payroll, classifications, or systems are compliant, it’s far better to check now than fix it later.

HR Dynamics works with businesses to identify risks early, review compliance, and put practical systems in place so you can move forward with confidence.