By Adrienne Silla | Head of Advisory, Australian Payroll Association
Discovering historical payroll underpayments is stressful enough for any organisation. But what happens when you've identified the problem, disclosed it to the Fair Work Ombudsman (FWO), and are then asked to enter into an Enforceable Undertaking (EU)?
We're seeing more businesses navigating this situation as they undertake payroll reviews, identify historical underpayments and voluntarily disclose the findings to the FWO.
For many organisations, the initial focus is understandably on calculating what employees are owed and making sure they are paid correctly. However, the process doesn't necessarily end there. The FWO may require the business to enter into an Enforceable Undertaking, setting out exactly what it must do to address the underpayments and demonstrate that the same issues won't happen again.
So, if your business receives an EU, what should you expect, and what should you be thinking about before signing?
First, What Is an Enforceable Undertaking?
An Enforceable Undertaking is a formal, written agreement between an employer and the FWO. It is generally used as an alternative to court proceedings, with the aim of addressing workplace law breaches, remedying the impact on employees and preventing future non-compliance. An EU is more than a commitment to repay employees. It typically includes an acknowledgement that workplace laws have not been followed, an agreement to rectify the identified issues and a series of actions designed to improve future compliance.
Depending on the circumstances, these obligations may include:
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Completing historical payroll remediation and back-paying affected current and former employees.
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Paying applicable superannuation and other outstanding entitlements.
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Contacting affected employees and providing information about the underpayments.
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Engaging an independent payroll specialist to review payroll practices and systems.
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Implementing improved payroll processes, controls and compliance procedures.
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Providing payroll training to relevant employees and management.
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Undertaking regular payroll audits and reporting progress to the FWO.
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Publishing a notice or statement acknowledging the contraventions.
The specific requirements will depend on the nature and extent of the underpayments and the circumstances of the business. Importantly, an EU is legally enforceable. Once signed, the organisation is committing to deliver what has been agreed, within the specified timeframes.
Don't Treat the EU as Just Another Document to Sign
One of the biggest mistakes a business can make is treating an EU as an administrative step to get through so it can move on from the underpayment issue. The commitments can be significant, and some may extend well beyond the original remediation project.
Before signing, businesses should take the time to understand exactly what they are agreeing to.
1. Understand the scope of the commitments
Read every obligation carefully. Does it require the business to remediate a specific group of employees or does it extend to all employees across the organisation? Are there requirements to review other awards, enterprise agreements, payroll processes or employee entitlements?
It is important to understand the full scope, particularly where the organisation has multiple payroll systems, business units or employment arrangements.
2. Check the remediation methodology
Backpay calculations need to be accurate, supportable and based on a sound methodology. Consider whether the data is complete, whether all affected employees have been identified, and whether the calculations properly account for changes in employment arrangements, classifications, hours and pay rates over the remediation period.
If the original data is incomplete or assumptions are required, these need to be properly documented and addressed. A remediation exercise is only as reliable as the information and methodology supporting it.
3. Be realistic about timeframes
An EU may include strict deadlines for completing backpayments, contacting employees, providing evidence and implementing new controls. Historical remediation can be a substantial exercise, particularly when employee records are incomplete, multiple awards or enterprise agreements are involved, or manual adjustments need to be reviewed.
Make sure the proposed timeframes are achievable and that the business has the people, resources and external support required to meet them.
4. Understand the ongoing compliance obligations
This is often the part that businesses underestimate. An EU may require independent payroll reviews, regular audits, management training and ongoing reporting to the FWO. These obligations can continue after the original underpayments have been repaid.
Businesses need to consider who will be responsible for these activities, how they will be monitored and whether the organisation has the internal payroll knowledge to maintain compliance.
Getting the Right Advice Matters
An EU should not be approached as a document that simply needs legal approval or a payroll exercise that needs to be completed as quickly as possible. It requires both an understanding of workplace legislation and a detailed understanding of how payroll operates.
We recommend involving workplace relations legal advisers and experienced payroll specialists early in the process. The FWO allows employers to provide input into a proposed EU and seek independent legal advice before signing. Payroll specialists can assist with reviewing the proposed remediation requirements, assessing whether the calculations and methodology are appropriate, identifying practical delivery risks and ensuring that any future compliance measures are meaningful and achievable.
It is also important to remember that the responsibility for compliance remains with the employer. Engaging a payroll provider or external consultant does not transfer that accountability.
The Focus Should Be on Getting It Right
Receiving an EU can feel like another layer of pressure for an organisation that is already dealing with the cost, complexity and reputational impact of historical underpayments. However, it is also an opportunity to address the underlying issues properly.
Repaying employees is essential but it is only one part of the solution. Businesses need to understand why the underpayments occurred, correct the processes and system configurations that contributed to them, and establish controls to prevent the same issues from happening again. The ultimate goal should be more than satisfying the requirements of the EU. It should be having a payroll function that can demonstrate ongoing compliance and give the business confidence that employees are being paid correctly.
If your organisation has identified historical underpayments or received an Enforceable Undertaking from the Fair Work Ombudsman, getting the right payroll expertise involved early can make a significant difference to how successfully you navigate the process.
The Australian Payroll Association's Advisory team works with organisations on payroll compliance reviews, remediation projects and ongoing payroll improvement, helping businesses address historical issues and build stronger payroll processes for the future.
