When one of Australia’s biggest banks admits to underpaying staff by hundreds of millions, it’s a wake-up call for every employer.

National Australia Bank (NAB) recently revealed that payroll system errors had cost it an estimated $130 million in remediation and back pay - and that number may climb higher as reviews continue.

It’s tempting to dismiss this as a “big bank problem.” After all, NAB employs tens of thousands of people under complex agreements. But the truth is far less comforting: the same risks that caught out NAB exist in almost every Australian business.

What Happened at NAB

NAB’s payroll issues came to light during its transition to a new enterprise agreement. The bank discovered errors spanning years, including missed allowances, miscalculated penalty rates, and underpayment of leave entitlements.

The fallout has been significant:

1. $130 million set aside for remediation

2. Ongoing regulatory scrutiny

3. Public trust shaken in one of Australia’s most established institutions

And NAB isn’t alone. Over the past five years, Woolworths, Qantas, and countless mid-sized companies have faced similar scandals.

Payroll mistakes don’t discriminate by size.

Sources:

1. Queensland Health – $1.2b payroll failure, 78,000 staff affected (ABC News)
2. Eagers Automotive – $16m backpay to 13,277 workers (The Australian)
3. RSPCA QLD – $2.8m underpaid across 1,130 staff (Courier Mai)
4. MAdE Establishment – $7.83m underpayment, ~500 staff (ABC News)
5. Sushi Bay – $653k underpaid, small chain ~100–200 staff (Highlands HR)
6. Abundance Café – $1.3k underpaid, ~10 staff (Adelaide Now)

The Hidden Payroll Risks Every Business Faces

Even if you only employ 20 people, the risks are real. Australia’s industrial relations system is one of the most complex in the world. Here are the most common traps:

1. Award misinterpretation – With more than 100 Modern Awards, applying the right rates and entitlements isn’t straightforward.

2. Missed entitlements – Overtime, weekend loadings, and allowances can slip through the cracks.

3. Manual processes – Spreadsheets and manual timesheet entry are error-prone.

4. STP reporting errors – Inaccurate submissions to the ATO can trigger audits.

The bigger problem? These errors often go unnoticed for years, until a Fair Work review, employee complaint, or system migration exposes them.

On average, payroll errors in Australia go unnoticed for 3–7 years before discovery... often only uncovered during audits or enterprise agreement changes.

By then, the damage is done.

The Cost of Getting It Wrong

Payroll mistakes don’t just hurt the balance sheet. They erode employee trust and damage your reputation in ways that are hard to repair.

1. Financial penalties – Back pay, interest, fines, and remediation costs.

2. Reputational damage – Headlines that undermine your credibility as an employer.

3. Regulatory scrutiny – Increased oversight from the Fair Work Ombudsman.

4. Staff morale – Employees who feel undervalued are more likely to leave.

If a major bank can take a $130 million hit, what could a compliance slip cost your business?

How to Avoid Becoming the Next Headline

The good news is that payroll compliance doesn’t have to be a gamble. A few proactive steps can dramatically reduce your risk:

1. Automate award interpretation – Use payroll software that automatically applies award rules and keeps them updated.

2. Audit regularly – Don’t wait for an external review. Run quarterly internal checks against Modern Awards and enterprise agreements.

3. Tighten timesheet processes – Integrate attendance tracking with payroll to eliminate manual data errors.

4. Monitor STP submissions – Review every report before it goes to the ATO.

5. Educate managers – Ensure rostering and HR staff understand their compliance obligations.

The NAB case isn’t just a headline — it’s a cautionary tale. Every business, from pharmacies to private hospitals to small retailers, can learn from it.

Final Word

Payroll may not be glamorous, but it’s one of the most critical functions in any organisation. As NAB’s costly mistake shows, getting it wrong can be devastating.

For business owners, payroll managers, and HR leaders, the lesson is clear: don’t rely on manual checks or outdated systems. Invest in compliance, automate where possible, and treat payroll accuracy as a strategic priority — not an afterthought.

Because at the end of the day, it’s not just about avoiding fines. It’s about protecting your people, your reputation, and your bottom line.