How to Conduct a Modern Award Compliance Audit: Guide

• A modern award compliance audit reviews your pay rates, employee classifications, penalty rates, break arrangements, and record keeping against the relevant modern award — at minimum once a year.

• The Fair Work Commission (FWC) reviews modern award pay rates annually, so your audit schedule should align with those changes.

• Common compliance gaps include misclassified employees, unpaid penalty rates, and incomplete payroll records — all of which carry significant financial and reputational risk.

• Tools like Deputy's award interpretation features can help surface potential issues with pay calculations and record keeping before they become underpayment problems.

Conducting a modern award compliance audit can feel like a daunting task for employers across Australia. The many award classifications, changing requirements, and sheer volume of information make it easy to feel overwhelmed.

Despite these challenges, regular audits are a non-negotiable part of running a business. Recent cases like Woolworth's $1.2 million fine for underpayment highlight the significant consequences of letting discrepancies go unaddressed — especially for shift-based industries. The stakes are more than financial: non-compliance damages employee trust and company reputation too.

Don't let these pitfalls discourage you. This guide walks you through the process of modern award compliance audits to help your business stay on the right side of Australia's employment laws.

What is a modern award compliance audit?

Modern awards outline the terms and conditions of employment for different industries and occupations in Australia. A modern award compliance audit is a structured review of your business practices against the relevant modern award obligations.

Modern awards regulate several key areas of employment:

• Basic pay rates — employees must be paid at least the minimum wage rates set by their modern award.

• Penalty rates — apply when employees work outside regular business hours, including evenings, weekends, and public holidays.

• Overtime rates — apply when employees work beyond the normal or rostered hours defined in their modern award.

• Allowances — compensate employees for specific conditions or work performed outside their regular responsibilities.

• Break arrangements — specify the frequency, duration, and timing of meal and rest breaks, including longer breaks for certain shift schedules.

Modern awards aren't static documents. They evolve to reflect changes in workplace practices, the economy, and social shifts. According to Deputy's The Big Shift 2025 report, retail wages rose from $27.40 to $32.50 per hour in 2024 — a significant jump that catches some businesses off-guard if they haven't updated their payroll processes.

The Fair Work Commission regularly reviews and updates modern awards to keep them fair and relevant. To keep up with these changes, you need to be proactive — and that means building regular audits into your business calendar.

How to conduct a modern award compliance audit

These steps help you work through a modern award compliance audit methodically and address the standards that protect both you and your workforce.

1. Gather official resources

• Obtain the latest versions of modern awards from the FWC.

• Consider whether multiple awards apply to your workforce because of varying roles.

• Access recent FWC decisions that could affect your compliance.

2. Collect internal documentation

• Gather payroll records, employment agreements, and leave records.

• Compile records of company policies, employee handbooks, and training data.

• Make sure all collected documents thoroughly reflect your current employment practices.

3. Compare official obligations with your internal records

• Cross-reference pay rates with the minimum wages stipulated in relevant awards.

• Check compliance with hours of work requirements, including breaks, shift lengths, and rostering.

• Verify correct payment of overtime and penalty rates.

• Check that the right allowances, loadings, and entitlements are provided to your employees.

• Confirm compliance with leave entitlements according to awards or agreements.

4. Address areas of non-compliance

• Identify any discrepancies or areas of concern.

• Develop a plan to rectify issues, which may include back payments.

• Implement structures to bring your practices in line with award requirements.

5. Develop your prevention plan

• Identify whether you need more frequent audits.

• Evaluate current staff training to reduce non-compliance risks.

• Update your policies where necessary.

• Consider tools like Deputy that can help streamline award compliance and record keeping — for example, Deputy's scheduling and time-tracking features let you set roster rules that reflect your award obligations, and the award interpretation engine surfaces pay rate calculations so you can review them before processing payroll.

6. Document your audit findings and report

• Produce a comprehensive report of your findings, remediation actions, and prevention plans.

• Share your results with stakeholders and leadership teams.

• Create a timeline for follow-up audits and compliance checks.

What to check in a modern award compliance audit

A thorough audit covers several key areas. Here's what to focus on.

Pay rates and classifications

Start by reviewing any changes to modern awards since your last audit — this includes updates to pay rates, levels, or employee classifications issued by the Fair Work Commission.

Then assess your obligations across each pay component:

• Your base pay rates meet or exceed the minimum standards for each classification.

• You apply the correct rates for work outside regular business hours.

• You provide the right allowances, loadings, and entitlements to eligible employees.

Examine each employee's responsibilities and qualifications to make sure they match the appropriate classification within their modern award. Employees should receive compensation that corresponds to their correct classification — misclassification is one of the most common and costly compliance errors.

Overtime and penalty rates

Penalty rates and overtime rules vary significantly between awards. In hospitality, for example, employees working Sunday shifts under the Hospitality Industry (General) Award are entitled to a higher penalty rate than a standard weekday. In retail, Saturday penalty rates apply under the General Retail Industry Award from the first hour worked.

Check that your payroll system applies the correct rates for:

• Evening and late-night shifts.

• Weekend and public holiday work.

• Hours worked beyond the ordinary span of hours.

• Overtime triggered by consecutive days worked or daily hour limits.

Break arrangements and rostering

Break compliance is a frequently overlooked area. Most modern awards specify minimum meal break and rest break entitlements based on shift length — and failing to comply can be treated as an underpayment.

Review your rosters to confirm:

• Meal breaks are rostered at the correct intervals (typically after five hours of work).

• You provide rest breaks as required by the relevant award.

• Employees aren't rostered for shifts that exceed maximum shift lengths without proper breaks.

• Break records are logged and accessible.

Record keeping and payroll practices

Using your payroll records, confirm that your employees currently receive their accurate award rates and entitlements. This includes checking for correct superannuation contributions.

Make sure all required employment records are up to date, easily accessible, and organised. These records must include hours worked, pay rates, entitlements, and superannuation contributions. Under the Fair Work Act, employers are required to keep these records for seven years. In 2023–24, the Fair Work Ombudsman (FWO) issued 760 infringement notices nationally for record-keeping and pay slip breaches.

Issues of non-compliance can occur for many reasons:

• Human error in data entry or payroll processing.

• Misunderstanding award or agreement obligations.

• Failing to update rates following annual wage increases.

• A mismatch between employee contracts and modern awards.

• Misusing annualised salaries without proper safeguards.

Non-compliance is rarely intentional. Still, deliberate compliance is a vital part of running an ethical business.

Common modern awards for shift-based industries

If you're running a hospitality or retail business with rostered teams, these are the modern awards most likely to apply to your workforce. You may need to comply with more than one if you employ people across different roles.

• Hospitality Industry (General) Award — covers employees in restaurants, cafes, hotels, and catering. Key provisions include penalty rates for evening, weekend, and public holiday shifts, split shift allowances, and specific break rules.

• General Retail Industry Award — covers most retail employees, including casual and part-time staff. Pay rates, penalty rates for weekends and public holidays, and overtime arrangements all sit under this award.

• Fast Food Industry Award — covers employees in fast food and quick service restaurants. Includes specific penalty rates for juniors and casual employees.

• Clerks — Private Sector Award — often applies to administrative and back-of-house roles in retail and hospitality businesses.

• Restaurant Industry Award — applies to some restaurant and cafe businesses not covered by the Hospitality Industry (General) Award, depending on the nature of the work.

Use the Fair Work Ombudsman's awards page to identify which award applies to your specific business type and employee roles. Getting the award right from the start is the foundation of a sound compliance approach.

How often to conduct a modern award compliance audit

The Fair Work Ombudsman actively monitors compliance through random inspections and targeted enforcement campaigns. Maintaining compliance with modern award pay rates and conditions requires consistent attention — not just a one-off review.

Here are some best practices for building a consistent audit schedule:

• Emphasise fair employment practices across your business.

• Keep detailed records of hours, pay rates, and allowances.

• Stay up to date with changes by subscribing to FWC updates.

• Train staff on modern award obligations.

• Consider third-party help when conducting audits.

Annual audits

At minimum, businesses need to perform a thorough modern award compliance audit once per year. This frequency is tied directly to Australia's legal framework: the FWC assesses modern award pay rates every year, which can result in changes across all modern awards.

The four-year FWC review cycle

Every four years, the FWC undertakes a complete review and update of all modern awards. The FWC has conducted or will conduct modern award reviews in 2020, 2024, 2028, and so on.

Given this four-year cycle, a more in-depth audit is usually recommended on the same schedule. Pay close attention to any major changes that may affect your business.

When to audit more frequently

Even though annual audits are the minimum and four-year reviews are critical, more frequent reviews are valuable. Quarterly or bi-annual compliance checks help catch discrepancies early, which reduces the risk of prolonged non-compliance and the associated costs.

You should also trigger an out-of-cycle audit when any of the following occur:

• You open a new location or expand into a different type of operation.

• You create new roles or change how existing roles are classified.

• A specific modern award applying to your business is updated mid-cycle.

• An employee raises a payroll concern or dispute.

• You switch payroll systems or rostering software.

Consequences of non-compliance with modern awards

The financial consequences of modern award non-compliance can be severe. Under the Fair Work Act 2009, penalties for serious contraventions — where a business knowingly engages in non-compliance — can reach up to $93,900 per contravention for a corporation, and even higher for franchisors and holding companies responsible for their networks.

Even unintentional underpayments carry risk. The Fair Work Ombudsman can issue infringement notices, pursue court-ordered penalties, and require back payments with interest. In 2024–25 alone, the FWO recovered $358 million for more than 249,000 underpaid workers. High-profile cases like Woolworth's $1.2 million fine demonstrate that no business is too large — or too small — to face scrutiny.

The impact goes beyond the financial. According to Deputy's The Big Shift 2025 report, 36% of retail workers are considering resigning — and pay disputes are a key driver of disengagement. Non-compliance damages the trust you've built with your team and can make it harder to attract and retain staff in a competitive labour market.

Other consequences include:

• Reputational damage — adverse media coverage and public naming by the Fair Work Ombudsman.

• Back-payment obligations — potentially spanning years of underpayments.

• Increased regulatory scrutiny — businesses found non-compliant are more likely to face follow-up inspections.

• Employee relations damage — loss of trust within your team that's hard to rebuild.

Self-reporting to the Fair Work Ombudsman when you identify a problem is worth considering. Businesses that voluntarily disclose issues and cooperate with investigators are typically treated more favourably than those where problems are uncovered through complaints or audits.

What to do if you identify non-compliance

The best approach is proactive prevention — but if you do identify an issue, here's what to do:

• Develop a sustainable remediation plan that addresses discrepancies promptly.

• Consider your communication strategy, both internal and external.

• Evaluate whether to self-report to the Fair Work Ombudsman.

Keep in mind that using award compliance software can help at any stage. It may simply be that you need to audit more frequently, offer clearer guidance on break timing, or revise your rules about who is eligible for overtime.

No matter the reason for non-compliance, addressing the issue promptly may be viewed favourably if penalties are later considered.

Essential resources for a modern award compliance audit

Keeping pace with modern awards can be tricky. These resources can help you stay informed about Australia's employment standards.

Modern award fact sheet and the National Employment Standards

This page covers what modern awards entail, who they cover within the national workplace relations system, and when they apply. It's a practical starting point for navigating and understanding employment laws.

FWC awards page for locating occupation-specific documents

This resource offers essential information on who awards cover to help you identify which award applies to which industry or job type. Use the "Find my award" tool to easily determine relevant awards for your business.

Comprehensive tool for accessing Australia's range of awards

A document search feature lets you search and view specific awards. You can download a comprehensive spreadsheet or browse an A–Z list of current modern awards.

Deputy's pay rate library for calculating compliance rates

This guide to our pay rate library demonstrates how Deputy supports pay rate calculations for better accuracy and streamlined management of modern award requirements.

When in doubt, don't hesitate to seek professional tools and assistance to make sure you're meeting your obligations as an employer.

FAQs

How can Deputy help with modern award compliance audits?

Deputy's Award Interpretation software is built to support the compliance process — not replace your responsibility for it. The platform's award interpretation engine applies the correct pay rules based on your configurations, so you can review calculated rates before processing payroll. Deputy also maintains a pay rate library, automates timesheet records, and stores the data you need to cross-reference during an audit.

What records should I keep for a modern award compliance audit?

Under the Fair Work Act, you're required to keep employment records for seven years. These records must include:

• Hours worked (ordinary hours, overtime, and any work outside standard spans).

• Pay rates applied, including any penalty rates, loadings, or allowances.

• Leave entitlements taken and accrued.

• Superannuation contributions.

Deputy's time-tracking and rostering tools automatically generate the timesheet and attendance records you'll need — reducing the manual effort of pulling this data together at audit time.

How does Deputy calculate penalty rates for different awards?

Deputy's award interpretation engine applies pay rules based on the modern award configurations set up in your account. When an employee works a shift that triggers a penalty — a Sunday shift under the Hospitality Industry (General) Award, for example — the system calculates the applicable rate based on the shift details. You review the output before it flows through to payroll. Deputy doesn't make the final compliance determination; it surfaces the calculations so your team can verify them.

Can Deputy help prevent underpayments?

Deputy supports underpayment prevention in a few practical ways. Scheduling rules can be configured to reflect roster restrictions in your award — for instance, minimum shift lengths or maximum hours before a break is required. Break reminders alert managers when a scheduled break is approaching. Time-tracking records give you an accurate picture of hours worked before payroll is processed. These features can help surface potential issues early — but your payroll team still needs to review and approve the final output.

How often should I use Deputy to check my award compliance?

Deputy's reporting and timesheet tools are designed to be used on an ongoing basis — not just at audit time. Reviewing your pay rate outputs and timesheet records each pay cycle means you can catch discrepancies as they occur, rather than discovering them months later during an annual audit. That said, a formal end-to-end compliance audit — comparing your configurations against the current award — should still happen at least once a year, and after any significant changes to your award or your workforce.

Does Deputy support multiple modern awards in one business?

Yes. Deputy supports multiple modern award configurations within a single account, which is important for businesses that employ staff across different roles — for example, a hospitality business with both kitchen staff covered by the Hospitality Industry (General) Award and administrative staff covered by the Clerks — Private Sector Award. Each employee can be assigned to the appropriate award configuration, and pay calculations will reflect the rules for their specific award.

Streamline modern award compliance with Deputy

Modern award compliance audits are a necessary part of running a business in Australia. Navigating the complexities of the process can be challenging — but you don't have to manage it alone.

Deputy offers workforce management software that supports compliance from rostering to payroll. From award-based wage calculations and timesheet record keeping to break reminders and scheduling rules that reflect your award obligations, Deputy gives your team practical tools to stay on top of the process.

Discover how to streamline modern award compliance during every shift with Deputy's Award Interpretation software, start a free trial, or contact our sales team to see it in action.