Most small business owners carry the same assumption: a Fair Work problem starts with an unhappy employee. Look after your team, and the risk looks after itself.
The latest figures make that assumption unsafe.
What the 2025-26 figures show
In September 2026 the Fair Work Ombudsman released its recovery figures for the financial year. More than $453 million in unpaid wages and entitlements was recovered for over 181,000 workers, up 27% on the year before.
The figure underneath that one matters more. Proactive investigations rose 86% in a single year, to more than 2,680. Those audits on their own recovered over $45 million for close to 14,000 workers.
A proactive investigation does not start with a complaint. The regulator selects a sector, a region or a business type, requests time and wages records, and audits them against the relevant award. Most employers find out when the letter arrives.
Fair Work Ombudsman Anna Booth also drew a distinction worth holding onto: there is a continuum of non-compliance, running from inadvertent mistakes through to deliberate acts.
Most of what we find is at the inadvertent end
A pay item configured once at setup and never revisited. An employee classified at the right level three years ago who has since taken on different work. A leave loading setting that was never switched on. An allowance in the award that nobody knew applied. A final pay missing a component the payroll system does not calculate on its own.
None of that is wage theft. All of it is still a contravention.
The difficulty with an error like this is that it does not sit still. It repeats every pay run, across every employee it touches, until somebody looks. A small weekly shortfall becomes a five figure liability across a few years and a handful of staff, and the business owner is genuinely surprised to hear it.
What it costs
Small business employers face civil penalties of up to $109,200 per contravention. That sits on top of the back pay itself, superannuation on the shortfall, interest, and the hours your team spends reconstructing records under someone else’s deadline.
There is also the criminal wage theft offence that commenced on 1 January 2025 for intentional underpayment. Genuine mistakes are not captured by it, and the Voluntary Small Business Wage Compliance Code exists to protect small employers who have taken reasonable steps. But relying on that protection means having actually taken those steps, and being able to show it.
Why goodwill is no longer a defence
Under a complaints driven model, a settled team was real protection. Nobody complains, nothing starts.
Under a targeted model, selection is based on sector and risk profile, not on grievance history. A business with loyal, long serving staff and an award interpretation error from 2022 is precisely the sort of business these audits are built to find. The absence of a complaint is no longer evidence that anything is right.
Four checks worth doing
You do not need a full audit to remove most of this exposure.
- Confirm the award, then the classification level. Not the award you assume applies, the one that actually does. Then check each employee sits at the level matching the work they perform now. How to find the right modern award
- Work through the allowances schedule. Open the award itself and confirm every allowance is either being paid or genuinely does not apply. This is where the quiet shortfalls live.
- Check your payroll system settings. Leave loading, overtime, penalty rates, superannuation on allowances. A payroll system applies what it was configured to apply, and the defaults are rarely right for your award. 5 payroll mistakes small businesses make
- Audit one termination pay. Final pays are calculated least often and checked least closely. Many systems do not apply leave loading to unused annual leave automatically, so it has to be added by hand every time. Ending employment, step by step
If something is wrong, finding it yourself puts you in a materially better position than having it found for you. Voluntary rectification is treated very differently to a discovered contravention.
Where to start
Our free Payroll Risk Self-Assessment Checklist walks through the areas small businesses most commonly get wrong.
If you would rather have someone else look properly, our Payroll and HR Health Check is a structured review of award coverage, classifications and payroll configuration, delivered as a written findings report with prioritised actions. From $950 + GST.