What to do if you think you've underpaid staff

Most farms don't underpay staff on purpose.

It usually happens slowly. Years go by, a worker stays on the same rate, the Award updates, the classification was never quite right to begin with, and one day someone realises the numbers don't add up.

If that's the spot you've just landed in, this is for you.

What you do next matters more than how the mistake happened.

How farm underpayments actually happen

Almost every underpayment we see on a farm comes from one of these:

• the wrong Award classification was used when the worker was hired
• allowances (wet work, tool, travel, meal) were never paid
• the casual loading was rolled into a flat rate without proper paperwork
• an all-in rate was meant to cover overtime, but doesn't actually cover the overtime being worked
• an annualised salary doesn't actually cover the full Award entitlements
• superannuation wasn't paid on all the right pay components
• piece rates fell below the minimum hourly equivalent
• a worker was treated as a contractor when they were really an employee

None of these are unusual. The Fair Work Ombudsman has run campaigns specifically on agricultural underpayments for years. Most farms they audit get caught on one or two of the above.

Step 1: Stop making the same mistake going forward

Before you work out what you owe, fix the rate from this pay period onwards.

If a worker is currently on the wrong rate, on the wrong classification, or missing an allowance, correct it in the next pay run.

This sounds obvious. It's the most-missed step.

Two reasons it matters:

• every additional pay period at the wrong rate adds to your back-pay liability
• fixing it forward is the strongest signal you're acting in good faith if a regulator asks later

Step 2: Work out what you actually owe

The honest answer: this part is harder than it looks.

A proper underpayment calculation needs:

• the right Award classification for each worker
• the correct rates for every pay period the worker was underpaid
• all allowances they should have received
• penalty rates that should have applied
• superannuation underpayment, separately
• PAYG and tax implications on the back-payment itself

You can do this yourself if you've got the time and the records. Pull the historical payslips, compare against the Pastoral Award or Horticulture Award rates that applied at the time (Fair Work keeps historical rate data), and work through it pay period by pay period.

Underpayment claims under the Fair Work Act can go back up to six years. If the underpayment has been ongoing, the calculation generally needs to cover that whole period. The Fair Work Ombudsman has signalled that six years is a minimum, not a cap, so going further back voluntarily can sometimes be the right call.

Or you can get help. This is exactly the kind of thing Pay & Fair Work is set up to handle.

Either way, write everything down. The calculation, the assumptions, the rates used, the periods covered. If anyone asks later, the documentation matters.

Step 3: Decide whether to go to Fair Work yourself

This one is a real decision and it usually benefits from advice.

In general terms: the Fair Work Ombudsman publishes a process for employers who want to self-report underpayments. Voluntary disclosure tends to result in better outcomes than being found out in an audit. The exact mechanism and what it means for your situation depends on the size of the underpayment, the number of workers affected, and whether there's a pattern.

There's an extra consideration since 1 January 2025. Intentionally underpaying employees can now be a criminal offence under the wage theft provisions of the Fair Work Act. Honest mistakes are not criminal. But the distinction between "honest mistake" and "should have known" matters. That's another reason to handle it openly rather than hope it goes unnoticed.

This is not a step to take on autopilot. The right call depends on what your calculation actually shows.

If the underpayment is small (one worker, a missed allowance, a short period), you may not need to involve Fair Work at all. Just back-pay it and move on.

If the underpayment is larger or affects multiple workers, the conversation about voluntary disclosure is worth having before you do anything else.

Step 4: Pay it back

Back-pay goes directly to the worker as a separate payment.

Things to get right:

• tax is withheld on the back-payment, the same way it would have been on the original wages
• the back-payment needs to appear on a payslip with clear breakdown of what's being paid and for what period
• the worker should get a written explanation of the underpayment, what's being paid, and how it was calculated
• if the underpayment covers a previous financial year, an amended PAYG payment summary may be needed

If superannuation was also underpaid, that's paid separately to the worker's super fund, not to the worker directly.

For workers who have left the business, you still have to find them and back-pay them. That's a legal obligation, not a courtesy. Fair Work has a process for unclaimed amounts if a worker can't be located.

Step 5: Make sure it doesn't happen again

The fastest way to keep underpaying farm workers is to fix this one and change nothing else.

The things that stop the next underpayment:

• an annual pay rate review against the current Award (the rates change every 1 July)
• a written Award classification for every worker, signed off when they're hired
• a payroll system that updates when Award rates change, not when someone remembers
• allowances built into the pay setup, not added ad hoc
• clear records of hours worked, including overtime and weekend work
• casual conversion offers made at the right time

These aren't optional extras. They're the difference between a farm that has one underpayment in its history and a farm that has rolling underpayments forever.

Underpayment prevention isn't just a payroll problem. It's a systems problem. The right HR systems for farms, proper employment contracts, documented inductions and WHS paperwork all overlap with payroll in ways most farms don't see until something goes wrong.

If you're not sure where to start

A 20-minute conversation with someone who knows agricultural payroll will usually tell you whether you're looking at a small fix or a bigger issue.

The free Headland Check covers the high-level questions: classifications, allowances, super, contracts. It's twenty plain-English questions, no login. Most owners come out of it with a clearer picture of where to look first.

If you'd rather just talk it through, get in touch. No sales pitch.

Final thoughts

An underpayment isn't the end of the world. It's the start of a process. Owners who handle it properly almost always come out of it better than they went in: cleaner records, better systems, fewer hidden risks on the books.

The ones who delay or hide it are the ones who get the call from Fair Work.

In farming, sorting it now beats sorting it later. Every time.