People and culture, a new frontier

Australian organisations are facing unprecedented change in workplace compliance. The Fair Work Ombudsman recovered $358 million for over 249,000 underpaid workers in 2024-25, bringing total back-payments to over $2 billion in five years^1,2. Criminal penalties for wage theft have also been added, effective January 1 2025³. Meanwhile, there is additional focus on psychosocial hazards and the importance of wellbeing in the workplace, the cost of which is estimated to have a $15 - $17 billion impact on the Australian economy each year⁴. At the centre of this storm sits the People and Culture (P&C) function - no longer a support service, they are now critical in setting strategic direction and determining whether organisations thrive or merely survive.

The question for Boards and Chief People Officers (CPOs) is whether the P&C Function is equipped to manage the challenges and navigate the path forward across payroll, psychosocial hazards, transformation, AI and ensuring same job same pay.

1. Payroll integrity and criminal liability

Since 2019, over 9,400 organisations across Australia have faced underpayment audits and enforcement action⁵. These are not all isolated incidents of rogue employers exploiting vulnerable workers. The vast majority demonstrate a systemic crisis emerging from the convergence of regulatory complexity, technological disruption, and a fundamental shift in accountability. Recent high-profile cases include Woolworths, Coles, and most of the large universities; organisations with sophisticated finance and HR Functions^6,7,8 and leading technology platforms.

The true costs extend far beyond the underpayment figures with organisations being required to pay court penalties, legal fees, interest, superannuation and the costs associated with reviewing and remediating their systems. Coles' preliminary estimate, as reported by the ABC Four Corners Program is that further remediation of between $150 million and $250 million may be required to reflect the findings of the court, including interest and on-costs. This is in addition to the repayments of $115 million already paid by Coles at the time of reporting⁹.

The regulatory environment has fundamentally shifted. Maximum civil penalties now reach $7.825 million or three times the underpayment amount, while criminal convictions including prison time apply to employers who deliberately underpay staff³.

The payroll crisis is not primarily a story of intent; it is a story of complexity meeting global systems. Australia's workplace regulations are extraordinarily complex, with 121 Modern Awards¹⁰. Most organisations people are covered by multiple, sometimes overlapping awards. Many organisations rely on global platforms that were never designed to handle modern awards or flexible work arrangements. Small configuration errors, when extrapolated across a large workforce over years, become multi-million-dollar exposures.

Directors face liabilities under criminal provisions for wilful blindness or inadequate due diligence. Directors can be held personally liable for underpayments, even where the company is liable separately¹¹. For ‘serious contraventions’ personal penalties can be $198,000, with company penalties being up to $4,695,000 where wage theft is found to have occurred and a criminal offence with clear evidence of intentional or reckless conduct. Individuals can face up to 10 years in prison¹².

The risk of underpayments increases where there are:

• Complex modern award structures with frequent changes
• Annualised salary arrangements that obscure penalty rates
• Inadequate payroll systems and poor (to no) time-recording (this is extremely common)
• Overlapping awards
• Multiple employee engagement models including part-time, casual and seasonal workforces

"Same Job, same pay" reforms: Since November 2024, over 7,600 workers across mining, aviation, and other industries have received pay increases up to $60,000 annually under new regulations requiring labour hire workers receive equivalent pay to permanent employees performing the same work. The reforms extend well beyond labour hire and contractors. For organisations with complex awards and varied pay structures, such as financial services (where different business areas attract very different salaries) the rules pose additional risk if roles are deemed "like for like." P&C teams must rigorously map role equivalency, scrutinise pay policies for equity, and proactively communicate their reasoning to mitigate potential challenges including morale and engagement.

Impacted sectors: Hospitality, retail, health, financial services, education, construction, agriculture, transport, manufacturing and professional services are all at heightened risk of non-compliance due to the complex award coverage, extensive use of casual / shift work, multiple worksites, poor record keeping, fast changing workforce models and pay per piece models.

2. Psychosocial safety: A new legal frontier

On 1 April 2023, Australia's Work Health and Safety (WHS) Regulations introduced explicit provisions requiring employers to identify, assess, and control psychosocial hazards, including workload, job control, workplace relationships, bullying, harassment, and organisational change¹³. New Commonwealth regulations, the Work Health and Safety Amendment (Managing Psychosocial Risk and Other Measures) Regulations 2022, commenced on April 1, 2023, explicitly extend workplace responsibilities beyond physical injury, introducing criminal liability for inadequate management of psychological hazards.

Psychological injuries are not merely a wellbeing issue; they are a significant financial cost.

• According to Safe Work the median claim in 2024 was $14,000 for severe physical injuries compared to the median compensation payment for a mental health injury of $67,400¹⁴
• Typical psychological claims result in over 34 weeks out of work compared to just eight weeks for physical injuries
• In NSW alone, psychologically unsafe workplaces cost approximately $2.8 billion annually in workers compensation claims, absenteeism, and presenteeism ¹⁵

Impacted sectors: Healthcare, public safety, emergency services, social assistance, education, hospitality, construction, and retail, which all face elevated psychosocial risks driven by high job demands, workplace trauma, bullying, and inadequate support systems.

3. Digital transformation and AI governance

Many organisations are turning to artificial intelligence and automation to improve productivity and efficiency. Yet AI introduces new risks: compliance, ethics, privacy, bias, and workplace culture. In August 2024, the European Union enacted the AI Act, the world's first comprehensive horizontal legal framework regulating artificial intelligence¹⁶. While Australia has not yet enacted equivalent legislation, the EU framework is already influencing multinational organisations and signalling the direction of global regulation.

The EU AI Act imposes strict obligations on high-risk AI systems used in employment and workers' management, including AI used for recruitment, performance management, monitoring, and automated decision-making¹⁷. Employers must conduct documented impact assessments, maintain transparency and notify workers of AI systems, ensure human oversight of outputs, and test for bias and discrimination pre-deployment. Breaches carry fines up to €35 million or 7% of global annual turnover, whichever is higher¹⁸.

In Australia, while formal AI regulation remains nascent, regulators and the Fair Work Commission are increasingly scrutinising the use of AI in employment decisions. Organisations using AI as part of transformation activities are also facing union pressure, public criticism, and Fair Work Commission pressure¹⁸. Retail has seen staff and customer pushback as automation and surveillance technologies erode job security and working conditions.

Impacted sectors: Financial services, retail, manufacturing, and administration-heavy sectors face backlash from automation and AI. Inadequate consultation during transformation drives unfair dismissal claims, industrial action, and loss of critical talent.

Heightened scrutiny: A new culture of accountability

The enforcement environment has fundamentally shifted. Regulators are no longer satisfied with policies, the Fair Work Ombudsman now demands data-driven evidence of compliance, ongoing audits, and transparency. Boards cannot rely on the assertion that "we have a payroll policy" - regulators look for systems, records, testing, and remediation.

Anonymous tip-offs have surged. In 2024-25, the Fair Work Ombudsman received 25,608 anonymous reports—a 50% increase from the prior year². Young workers, overrepresented in reports (33% of anonymous tips), are increasingly aware of their rights and willing to report exploitation. There is now lower tolerance for noncompliance, with criminal penalties for intentional underpayments and "wilful blindness." Professional services and white-collar sectors are also under increased scrutiny.

Employees are bringing more claims (unfair dismissal, class actions, psychological injury) linked to poor change management, workload, and bullying. This creates sustained litigation and enforcement risk across all sectors.

The evolving role of P&C leaders: From tactical to strategic

Gone are the days when compliance, transformation, employee experience, and wellbeing could be managed by siloed specialists. CPOs can no longer treat these responsibilities as separate issues. The real challenge lies in how these responsibilities overlap and amplify each other.

Successful P&C leaders are moving compliance from a tick-box activity to a foundational capability, one that enables the organisation to transform people from a source of risk into a competitive advantage. This shift requires a fundamentally different mindset and skillset.

The key differentiators between successful CPOs and their organisations, and those who struggle, will centre on:

1. adaptability,
2. strategic integration and
3. human-centred leadership.

CPOs who excel will be agile, able to influence beyond traditional HR boundaries, and act as trusted strategic partners to the board and executive, by having strong business, finance and digital skills that will help leaders navigate their people challenges. Success in the next era will belong to CPOs who are bold, collaborative, and future-focused, blending commercial insight, financial capability with empathy, driving both compliance and culture, and directly linking people decisions to enterprise-wide impact. Those who lag will be left responding piecemeal, risking disengagement, compliance failures, and strategic irrelevance. Struggling organisations will operate in silos, lag in embracing new skills, and remain reactive to compliance and transformation pressures rather than proactive.

This will involve rewiring the way P&C functions work and engage, they will be required to:

• Move from reactive to proactive – continuous systematic reviews of roles against awards, management of position descriptions, and classifications supported by real time accurate time keeping, training and reviews. Demonstration of immediate remediation will be critical.
• Remove silos and moving to integration - breaking down walls between payroll, Workplace Health and Safety (WHS), leadership development, and transformation teams will be key. Successful organisations integrate people data, payroll data, and WHS data to create a single, searchable source of truth. This enables early identification of risk, faster remediation, and evidence of due diligence for boards and regulators.
• Build cultures of adaptability, wellbeing, and transparency - culture is not soft. When intentionally designed, culture drives productivity, change effectiveness, and talent retention. It also creates resilience, the ability to absorb disruption and adapt. CPOs must act as visible champions for respectful, supportive, and inclusive workplaces, embedding cultural markers into everyday behaviours, systems, and leadership practices. By positioning psychological safety and staff engagement at the forefront, leaders foster resilience, open dialogue, and trust across the workforce, especially during periods of disruption and technological change. CPOs must model integrity, empathy, and transparency in decision-making, ensuring leadership teams are equipped to navigate complexity and engage the broader organisation. Success in this environment hinges on visible leadership, structured risk management, and thorough documentation supported by regular training, consistent board reporting, and adaptive, data-driven strategies that embed compliance and wellbeing in organisational culture.

CPOs themselves will need new capabilities, combining business acumen, financial literacy, and digital sophistication with deep people expertise and strong change leadership.

The key differentiators between successful CPOs and those who struggle will centre on adaptability, strategic integration, and human-centred leadership. Success in the next era will belong to CPOs who are bold, collaborative, and future-focused, blending commercial insight and financial capability with empathy, driving both compliance and culture, and directly linking people decisions to enterprise-wide impact.

Conclusion: The moment of choice

The era of compliance as a checkbox exercise has ended. The regulatory environment, enforcement intensity, and stakeholder expectations have fundamentally changed. With over $2 billion in back-payments, criminal penalties now in force, and mounting psychosocial risks, boards cannot afford reactive approaches.

The People and Culture function stands at a crossroads. On one path lies complacency - organisations that treat compliance as a cost, psychosocial safety as HR's problem, and AI as a technology challenge. These organisations will face enforcement action, reputational damage, litigation, and talent exodus.

On the other path lies transformation organisations that invest in payroll modernisation, embed psychological safety into strategy and operations, deploy AI thoughtfully and transparently, and build cultures of integrity and accountability. These organisations will attract talent, retain trust, and turn people into a genuine competitive advantage.

Success requires integrated frameworks that connect compliance, culture, and transformation supported by robust governance, adaptive leadership, and relentless focus on people. The organisations that thrive will be those led by CPOs who see compliance and wellbeing not as constraints, but as the foundation for resilience, innovation, and sustainable performance. The question is no longer whether to act, but whether your organisation has the leadership to navigate this new frontier.