Why payroll errors are becoming a board-level issue in manufacturing

Payroll has traditionally been treated as an administrative function: necessary, repetitive and largely invisible when it works. In manufacturing, that view is becoming dangerous.

A payroll error is no longer simply a correction to be handled by finance or human resources. It can expose a manufacturer to back-payments, penalties, legal costs, workforce disruption and lasting reputational damage. It can also reveal deeper weaknesses in the organisation's systems, data governance and internal controls. This makes payroll accuracy a legitimate board-level risk.

The scale of the problem is hard to dismiss. The Fair Work Ombudsman reported recovering $358 million for more than 249,000 underpaid workers in 2024-25. Around 60 per cent of those recoveries came from large corporate employers. Meanwhile, the 2026 State of Payroll Compliance report, based on research by Lonergan Research among 540 Australian employers, found that one in three was not confident it was paying employees correctly.

Why the manufacturing sector is exposed

Manufacturing is particularly exposed because its payroll conditions are rarely straightforward. A single site can include permanent employees, casuals, apprentices, contractors and labour hire workers. Employees may work rotating rosters, weekends, public holidays, night shifts, overtime or call-backs. Their pay can involve different classifications, allowances, loadings and conditions under an enterprise agreement.

Every change to a roster, role, location or employment status creates another point where workforce data can be misinterpreted or transferred incorrectly. When time and attendance, rostering, human resources and payroll operate in separate systems, manual intervention often fills the gaps. A spreadsheet adjustment or an incorrect award rule may seem minor in one pay cycle but become a material liability when repeated across hundreds of employees over several years.

Legislation to be aware of

The legal environment has also changed. Since 1 January 2025, intentionally underpaying wages or entitlements can be a criminal offence under amendments to the Fair Work Act 2009. Honest mistakes are not criminalised, but boards should not mistake that distinction for permission to tolerate weak controls. Once an organisation becomes aware of a potential problem, its response, investigation and remediation will be critical.

Manufacturers must also understand which industrial instrument applies to each worker. The Manufacturing and Associated Industries and Occupations Award 2020 sets out detailed requirements for classifications, ordinary hours, shiftwork, overtime, allowances and public holiday payments. Other manufacturers may fall under awards covering food and beverage production, timber, vehicle repair or other activities. Enterprise agreements can add another layer of complexity.

There are also new labour hire considerations. Under the Closing Loopholes reforms, the Fair Work Commission can make orders requiring labour hire employees to receive a protected rate of pay that is no less than the rate they would receive under a host employer's enterprise agreement or other relevant instrument. Manufacturers using labour hire should ensure that procurement, operations and payroll teams share the information needed to apply these obligations correctly.

Payday Super can cause compliance issues

Another immediate change is Payday Super. From 1 July 2026, employers must pay superannuation guarantee contributions with each pay cycle rather than quarterly. This significantly reduces the time available to identify and correct errors. Incorrect classifications, earnings calculations or employee fund details can now create compliance problems every payday, not just every three months.

Payroll reporting is critical

Fair Work says that Record-keeping is equally important, and rules require employers to keep accurate employee time and wage records for seven years and issue compliant payslips. Where records are missing, an employer may be required to disprove a wage-related allegation in court. For boards, this means data quality and audit trails are not technical details. They are evidence of whether the organisation can demonstrate compliance.

Boards do not need to approve every pay run, but they should expect meaningful assurance. Management should be able to explain which awards and agreements apply, where payroll data originates, how rule changes are implemented, how exceptions are reviewed, and when the payroll environment was last audited independently.

Payroll reporting should also go beyond whether employees were paid on time. Useful board indicators include the number and value of corrections, recurring error types, manual adjustments, unresolved employee queries, late super contributions, and progress on remediation. A rising volume of corrections may signal a systemic problem, even when the dollar value appears modest.

Connected workforce systems ensure payroll accuracy

Technology can reduce risk, but automation alone is not the answer. A poorly configured system can process the wrong rule with remarkable consistency. Manufacturers need connected workforce systems, clear accountability and regular testing against actual working patterns. Payroll, finance, HR, operations and IT must treat workforce data as shared business infrastructure.