How outsourcing your payroll will save you in wages and legal fees

Updated 1 September 2026: This article has been updated with recent Australian payroll underpayment cases and current information about payroll compliance.

Payroll underpayments are not limited to small businesses with poor record keeping. Some of Australia’s largest employers have discovered payroll errors running for years, often because the rules sitting between an employee’s recorded hours and their final pay were not applied correctly.

The scale of the problem is significant. The Fair Work Ombudsman recovered $358 million for more than 249,000 underpaid workers in 2024-25 alone. Around 60% of those recoveries came from large corporate employers.

Recent Australian payroll underpayment examples

Recent cases show just how varied the causes can be:

University of Queensland: In September 2026, the university entered into an Enforceable Undertaking after identifying approximately $11 million in underpayments, including interest and superannuation, affecting 16,382 employees. The Fair Work Ombudsman said incorrect payroll configurations, clerical errors and other oversights contributed to issues involving minimum engagement periods, casual pay codes, base rates and overtime.
Southern Cross Care (NSW & ACT): In April 2026, the organisation agreed to rectify more than $11.7 million in underpayments to around 5,500 employees. The problems included issues with its time and attendance system and a manual payroll process that did not correctly apply enterprise agreement requirements for overtime, allowances and shift penalties.
RSPCA Queensland: In June 2026, RSPCA QLD reported approximately $4.3 million in remediation covering 1,008 employees. Enterprise Agreement and Award provisions had been incorrectly applied across minimum hours, penalty rates, overtime, allowances and minimum engagement requirements.
Federal Court of Australia Listed Entity: In August 2026, a payroll configuration issue was disclosed affecting 248 casual employees. Employees who recorded fewer than four hours on their timesheets were not always paid the four-hour minimum engagement entitlement required under the relevant enterprise agreements. Total remediation was estimated at approximately $77,000, including superannuation and interest. Read our analysis of the Federal Court payroll underpayment.
Westpac: In late 2025, Westpac entered into an Enforceable Undertaking after back-paying nearly 47,000 employees more than $50 million. The Fair Work Ombudsman said the underpayments were primarily caused by failures in systems, governance and compliance oversight, along with manual adjustments, record-keeping problems and input errors.

There is a fairly clear pattern here.

Payroll problems are often not caused by someone simply entering the wrong hourly rate. They can occur when an Award or Enterprise Agreement is interpreted incorrectly, a payroll rule is configured incorrectly, a manual adjustment is missed, or the system does not account for conditions such as minimum engagements, overtime, penalties or allowances.

How can outsourced payroll reduce payroll risk?

An experienced outsourced payroll provider gives your business another layer of payroll expertise and review. Rather than relying on one internal employee to keep track of payroll processing, system configuration and changing employment conditions, you have a dedicated payroll team running the process.

That can be particularly useful for businesses dealing with complex Awards, Enterprise Agreements, penalty rates, overtime, allowances, leave and different employee classifications.

Outsourcing payroll does not remove the employer’s responsibility to pay employees correctly. Your business still needs to provide accurate employment information, classifications, approved hours and details of changes that affect employee entitlements. What outsourcing can do is give you a more structured process for turning that information into a completed pay run.

With ClockOn’s Outsourced Payroll Service, our payroll team can manage the regular payroll processing for you using ClockOn’s payroll platform. Depending on your setup, this can include payroll calculations, processing approved timesheets, leave and allowances, STP reporting and superannuation processing.

Where does the cost saving come from?

The purpose of outsourcing payroll should not be to reduce wages employees are legitimately entitled to receive. The more realistic saving is in the cost of running payroll itself.

For an internal payroll team, a pay run can involve collecting and checking timesheets, following up managers, applying payroll rules, entering adjustments, calculating entitlements, checking exceptions, finalising payroll, submitting STP and dealing with questions afterwards.

When much of that work moves to an outsourced payroll team, the internal workload can fall considerably. Depending on how your business currently operates, that may mean:

less internal time spent processing each pay run;
less reliance on one employee who holds most of the payroll knowledge;
fewer manual calculations and duplicated data entry;
less time spent finding and correcting payroll errors;
more consistent payroll processes from one pay cycle to the next; and
access to payroll software, time and attendance tools and reporting without having to build the process yourself.

There is also a much larger potential cost sitting behind payroll mistakes. When an error continues across hundreds of employees and several years, the business may need to reconstruct historical payroll records, calculate back-payments, pay additional superannuation and interest, contact former employees and conduct independent audits. Recent Fair Work cases show how quickly a relatively narrow payroll problem can turn into a substantial remediation exercise.

Payroll outsourcing still needs good information

Outsourced payroll works best when responsibilities are clear. Your payroll provider can process the pay run, but they still need to know when an employee changes classification, starts working under different conditions, receives a new allowance or has another change that affects their pay.

The strongest setup combines reliable payroll software, accurate time and attendance data, clearly documented employment conditions and an experienced payroll team that knows what needs to be checked before payroll is finalised.