Payroll Pitfalls, Switching Risks and Official Sources
Payroll software pitfalls in Australia, and the official sources that help you fix them
The payroll and HR software failures that cost Australian employers most, from award misconfiguration and late super to bad migrations, and which official body to check or contact for each.
Most payroll software failures in Australia are configuration and process failures, not software bugs: an award rule set up wrongly and repeated every pay run, leave accruing at the wrong rate for years, super not reaching funds within the Payday Super deadline, year-to-date figures broken by a mid-year switch, bank details changed by a fraudster, or records lost when a subscription ends. Each one has a known fix and an official source that explains the rule: the Fair Work Ombudsman for wages, awards, payslips and records; the ATO for STP, PAYG withholding and super; state revenue offices for payroll tax; the OAIC for privacy; and the ACCC and the Australian Small Business and Family Enterprise Ombudsman for problems with the software supplier itself.
This is the pillar guide for the pitfalls and official sources section. It is general information, not legal or tax advice.
The ten most expensive failure patterns
| # | Failure | Typical cause | Guide |
|---|---|---|---|
| 1 | Systematic underpayment | Wrong classification, penalty or overtime rule; rates not updated after the annual wage review | Underpayment and wage theft |
| 2 | Wrong leave balances | Accrual rule, hours basis or opening balances wrong | Leave accrual errors |
| 3 | Late or short super | Payments still batched monthly or quarterly; rejected contributions not resent | Payday Super |
| 4 | STP data wrong | Pay items mapped to wrong STP categories | STP Phase 2 |
| 5 | Broken year-to-date after switching | Opening balances wrong; two systems reporting the same pay | Switching mid-year |
| 6 | Payroll fraud | Bank details changed through a compromised login or fake email | Employee data privacy |
| 7 | Data breach | Weak access controls; excessive data kept | Same guide |
| 8 | Records lost on exit | No export before the contract ended | Contracts and data export |
| 9 | Payroll tax missed | Threshold crossed after growth or grouping; contractor wages missed | See below |
| 10 | Price shock at renewal | No uplift cap; headcount growth | Renewal increases |
Why "the software does it" is not a defence
Payroll software automates rules you or your implementer configured. Vendor contracts usually say that compliance remains your responsibility. When things go wrong:
- underpayments must be back-paid, generally with super on the shortfall, and can attract civil penalties; intentional underpayment can be a criminal offence since 1 January 2025;
- late super attracts the super guarantee charge, which the employer pays;
- STP errors need correcting through update events or corrected pay events;
- privacy breaches may need to be notified if they are eligible data breaches and the Privacy Act applies to you.
You may have contractual remedies against the vendor or implementer, but they do not remove your obligations to employees and regulators.
Early-warning checks to run every pay cycle
- Compare total gross, tax, super and net pay with the previous comparable pay run and investigate big changes.
- Review the exceptions report: employees paid below their usual hours, negative leave balances, missing super funds.
- Check super payment status and rejections a few business days after pay day.
- Confirm STP submission succeeded.
- Review any bank detail changes since the last pay run.
And once a year, after the annual wage review: check rates, allowances and classifications; test a sample of employees against the award; and review user access.
Payroll tax: a state-based trap
Payroll tax is levied by each state and territory, with different thresholds, rates and rules for grouping related businesses and for contractor payments. Payroll software can report wages by state, but someone has to register, lodge and pay. Common mistakes are not registering when a threshold is crossed after growth, missing the grouping of related entities, and leaving out payments to contractors that count as wages. Check the revenue office in each state or territory where you pay wages and get advice if you are near a threshold.
Which official body for which problem
| Problem | Official source | What they can do |
|---|---|---|
| Pay rates, awards, payslips, records, underpayment | Fair Work Ombudsman | Information, pay calculators, small business help, investigations |
| Award content and the annual wage review | Fair Work Commission | Awards and variations, wage review decisions, dispute resolution |
| STP, PAYG withholding, super guarantee, Payday Super | Australian Taxation Office | Guidance, payment plans, voluntary disclosure, penalties |
| Payroll tax | State and territory revenue offices, e.g. Revenue NSW, State Revenue Office Victoria, Queensland Revenue Office | Registration, returns, rulings |
| Employee data privacy and breaches | OAIC | Guidance, notifiable data breach reports, complaints |
| Cyber incidents and payroll scams | Australian Cyber Security Centre | Reporting and advice |
| Unfair contract terms, misleading claims by a vendor | ACCC | Guidance, enforcement |
| Dispute with a software supplier | Australian Small Business and Family Enterprise Ombudsman and state small business commissioners | Dispute assistance, referrals |
| General employer obligations | business.gov.au | Guides and links |
When to bring in a professional
- You find a possible underpayment affecting several employees or past years: speak to an employment lawyer or payroll specialist before calculating back pay, and consider contacting the Fair Work Ombudsman.
- Super is late: ask your BAS or tax agent about the super guarantee charge and voluntary disclosure.
- You suspect a data breach: follow your response plan and get legal advice on notification.
- A vendor dispute is escalating: get legal advice on the contract and contact the ASBFEO.
Frequently asked questions
Will the Fair Work Ombudsman help me as an employer?
Yes. It provides information and tools for employers, including small business help. If you find an underpayment, acting promptly to fix it matters.
Can I claim compensation from my software vendor for an underpayment?
Possibly, depending on the contract and the cause, but most contracts limit the vendor's liability. Get legal advice; your obligation to back-pay employees remains.
How far back should I check if I find an error?
Look back as far as the error goes. Employees can generally claim underpayments for up to six years. Get advice on the calculation.
Is there a free service to check award rates?
The Fair Work Ombudsman's pay calculator and pay guides are free. Use them to test your software's results.
Sources
- Fair Work Ombudsman — employer tools, pay calculator, record keeping
- Australian Taxation Office — STP, Payday Super and super guarantee charge
- Office of the Australian Information Commissioner — privacy and notifiable data breaches
- Australian Small Business and Family Enterprise Ombudsman — supplier disputes
- business.gov.au — employer obligations and state payroll tax links
