SMEs face growing payroll challenges one year in on wage theft reforms
A year after wage theft reforms came into effect, Australian SMEs are confronting a new reality. Paying employees correctly has become more complex than ever, and confidence in payroll accuracy remains fragile.
Smaller businesses maintain relatively steady confidence, but mid-sized organisations with 200 to 999 employees report the greatest strain. As these businesses expand, processes struggle to keep pace with workforce complexity, and errors can ripple across the organisation if not addressed early.
Recent research shows that mid-sized employers are taking action. More than half have invested in staff training, 44 percent have conducted payroll and compliance reviews, and 42 percent have strengthened system integration. Despite these efforts, confidence in pay accuracy has not kept up. 36 percent of employers say they are unsure if they pay employees correctly, with mid-sized organisations reporting confidence at just 58 percent.
“The reforms have rightly shone a spotlight on deliberate underpayments, but what we see more often are unintentional mistakes,” said Marcus Zeltzer, Founder and Managing Director of Yellow Canary. “These mistakes come from complex systems, changing work patterns, and human error, not intent. The real challenge is creating visibility and governance that prevents errors before they escalate.”
One payroll error can trigger a cascade
Payroll errors rarely occur in isolation. A single miscalculation can uncover deeper issues across the employee lifecycle, including misclassified roles, award mistakes, superannuation, leave entitlements, and payroll tax. These issues can compound quickly, amplifying risk and complexity.
“An error in payroll can reveal underlying problems across the business,” Zeltzer explained. “Businesses that do not address these issues early risk compounding problems that are far more costly and difficult to resolve later.”
The consequences extend beyond finance. Payroll accuracy has become a central concern for boards, advisers, and regulators. What once may have been seen as a routine operational matter now represents a test of governance and organisational maturity.
Mid-sized businesses feel the pressure first
The research shows that mid-sized employers are under the greatest pressure. More than half report difficulty understanding modern awards and enterprise agreements. Responsibility for payroll often sits across multiple roles. In businesses with 50 to 199 employees, 31 percent assign responsibility to the CEO or Managing Director, and 35 percent to the Head of Payroll.
“Payroll touches multiple teams, from leadership to HR and finance,” Zeltzer said.
“That is why clear processes and regular checks are essential.”
Audits prevent problems before they escalate
Regular payroll audits remain the most effective way to catch errors early. Quarterly reviews are now the most common approach, adopted by 35 percent of organisations. Yet 7 percent of employers still skip regular checks, and most of these act only after a problem has emerged.
“Waiting until an issue arises is too late,” Zeltzer said. “The more frequently organisations review payroll, the sooner they catch errors, reduce risk, and ensure employees receive the pay they are entitled to.”
Visibility builds confidence
The research makes clear that action alone does not guarantee confidence. Persistent uncertainty in pay calculations and employment instrument interpretation means many SMEs still need to strengthen areas within their people, processes, and platforms.
For Australian SMEs, help lies in visibility. Employers who can see payroll data clearly, validate outcomes across the employee lifecycle, and explain results with confidence build trust both internally and externally.
“Confidence does not come from assuming payroll is correct,” Zeltzer said. “It comes from visibility, transparency, and the ability to validate all outcomes.”
As workforce complexity grows and regulatory scrutiny intensifies, payroll compliance is no longer a back-office task. For SMEs, it should be a strategic priority, essential to reducing risk and supporting sustainable business growth.
About Yellow Canary
Yellow Canary develops Australia’s leading payroll audit and compliance platform, helping businesses manage employee payments, entitlements, superannuation, and long service leave. Leveraging automation and AI, the platform supports both historical and ongoing compliance reviews, giving organisations visibility and confidence in navigating complex industrial relations requirements.
Download the 2026 State of Payroll Compliance report here.
