Paying staff correctly: where Fair Work rules meet your cash flow

For most employers, payroll is the largest bill of all, and it is the only one with a legal floor under it. You can negotiate rent, switch a supplier or delay a purchase. You can’t negotiate the award.

That makes payroll the place where compliance and cash flow collide. A business that is a little short in the month pays staff first and sorts the rest out later, which is the right instinct. The harder problem is when the business is paying staff on time but paying them wrongly, and a backpay bill turns up months or years later.

This guide covers what Fair Work expects, where small employers slip, and how to fund correct pay without taking on the wrong kind of debt.

What changed for pay on 1 July 2026?

The 2026 Annual Wage Review set a new national minimum of $26.44 an hour, or $1,004.90 across a 38-hour week, applying from 1 July 2026. Modern award minimum rates went up by 4.75 per cent. Each rise applies from the start of a pay period after that date, so when it reaches your staff depends on how your pay cycle falls.

Two details are worth noting:

• Most staff are on an award, not the national minimum. The award sets base rates, and also penalty rates, overtime, allowances and loadings. A rise to the base rate flows through to each of those.
• The bottom of some award grades is being restructured. Commentary on the decision says the lowest classification is being wound back in a number of awards. If you employ staff on an entry-level grade, check your award’s current schedule rather than last year’s pay table.

Do not rely on a payroll template built last year. Open the award, find each classification, and test one real payslip.

Where do small employers underpay without meaning to?

The Fair Work Ombudsman’s recovery cases keep returning to the same few traps.

1. Casual loading and penalty rates mixed up. Casuals get a 25 per cent loading on the base rate, but that loading isn’t a substitute for weekend, evening or public holiday penalties unless the award says so.
2. Salary that doesn’t cover the award. An annualised salary has to leave an employee at least as well off as the award would have for the hours really worked. A flat salary can quietly fall behind after a rise.
3. Unpaid time. Pre-shift setup, closing duties, training and travel between sites are common sources of unrecorded work.
4. Junior and apprentice rates. Age, stage of training and qualification decide the rate, and each changes on a date.
5. Allowances and reimbursements. Tool, vehicle, first-aid and meal allowances are small per shift and large over a year.

None of this requires bad intent. All of it can still mean back pay, and since 1 January 2025, intentional underpayment is a criminal offence. The Fair Work Ombudsman has published a Voluntary Small Business Wage Compliance Code that gives employers who follow it, and who underpaid unintentionally, a safeguard against criminal prosecution. The code rewards two habits: keeping up with changes, and acting quickly when you find an error.

What records and payslips do I need?

You must issue each employee a payslip within one working day of paying them, and keep employee records for 7 years. Records cover hours worked, the pay rate and any loadings, super contributions, leave balances and the payslips themselves.

This is not paperwork for its own sake. If an employee disputes pay, it is the employer who has to show it was right. A café operator took to court by the Fair Work Ombudsman over record-keeping failures is a reminder that missing paperwork becomes its own breach. A business with clean timesheets and a payroll system that matches the award is in a different position from one reconstructing hours from memory.

Single Touch Payroll reporting sits alongside this. Each pay run goes to the ATO, and the figures should reconcile with your payslips, your bank transfers and your super payments. When they don’t, you want to find out before an auditor does.

How does correct pay affect cash flow?

There are three effects, and the third is the one owners miss.

The base moves with every award change. A 4.75 per cent rise on a $60k fortnightly payroll adds about $2,850 per fortnight, or roughly $74k over a year, before super and payroll tax. Add 12 per cent super and the cash cost is more again.

Super leaves earlier. Payday Super gives the fund seven business days from payday to receive each contribution, which ends the quarterly float that once cushioned the account. Our super guide covers the mechanics.

Penalties scale with trading hours. Cafés, retail, hospitality and care services that trade evenings and weekends pay more per hour on those shifts. A busy Saturday that looks great on the till may produce a thinner margin than a quiet Tuesday once penalties are counted.

Add payroll tax if you cross your state’s threshold, and the true price of an employee runs well above the headline hourly rate. The guide on payroll tax by state shows where that threshold sits.

How do I fund correct pay when cash is tight?

Start by separating a timing gap from a margin problem.

Problem	What it looks like	Sensible response
Timing gap	Revenue is fine, but customers pay in 45 days and wages go out weekly	Tighter terms, a line of credit or invoice finance
Seasonal dip	Four quiet months a year	A facility sized to the dip, set up before the dip
Margin problem	Revenue covers wages only if staff are underpaid	Reprice, change the roster, or rethink the model
Back-pay bill	A correction owed to current or former staff	Pay it, with a plan if needed, and fix the cause

If your bank will provide a facility sized to payroll, take that seriously. Banks are often the cheapest funding, and a long relationship counts. If yours has declined, you have other options, and funding staff wages outlines them. For a one-off squeeze, see how to fund payroll in a tight month, and for a situation where wages are due now, the page on payroll due and cash is short is blunt about the trade-offs.

What you should not do is shave pay to get through. A short-term loan is a cost you can plan. An underpayment claim is a cost you can’t.

A worked example

This is an illustration only. A Geelong cafe with 11 staff, mostly casual, pays a roster-based wage bill of $14,500 a week. After the July award increase, the owner’s payroll software applied the new base rate but a rule for Sunday penalty rates was left on last year’s multiplier.

Three months later a part-time employee queried a payslip. Checking the setup showed 9 staff had been underpaid by small amounts on Sundays. The total came to $3,900, tiny compared with the weekly wage bill but large against a cash balance that rarely exceeded $10k.

The owner did four things quickly. They paid the back pay in full with corrected payslips and told each person what had happened. They fixed the rule in the software. They wrote down the checks they’d made, which counted in their favour. And they set up a modest overdraft-style facility of $20k, so a correction of that size never needed to come out of the weekly float again.

The lesson: the money was never the real danger. Not knowing was.

A short payroll checklist for each award change

• Download the updated pay guide for every award your staff are under.
• Test one payslip for each classification, including a weekend shift.
• Check casual loading, junior rates and allowances separately.
• Review salaried staff against the award for the hours they actually work.
• Confirm super is calculated on the right base and leaves in time.
• Keep a dated note of what you checked.

Planning payroll that you can actually afford

If rising wage costs are squeezing the account, or you’re about to take on staff and want funding that matches the pay cycle, we can look at it with you. The guide to funding new staff is a good starting point, and so is our overview of the key dates in the tax calendar, because payroll and tax collide at predictable times.

The enquiry form is a one-minute job, and asking leaves your credit file alone. Your details stay with us, not passed along to a queue of lenders, so there’s no flurry of calls. Someone on the team reads your payroll picture and rings you to go through the numbers. Give us honest figures for wages and funding, and the first option we suggest is far more likely to be the right one.

Find out what payroll funding fits your business →