The Fair Work Ombudsman (FWO) has a national, multi-year inquiry underway into workplace compliance in the disability support services sector, which it has identified as one of its priority areas.
The regulator says its previous work in the sector has identified widespread, and at times large-scale, non-compliance with workplace laws. Between January 2020 and December 2024, the FWO responded to more than 75,000 enquiries relating to the sector, received more than 2,500 anonymous reports, completed more than 3,000 matters and recovered close to $68 million for workers.
$68 millionrecovered for workers in the sector, January 2020 to December 2024
The inquiry goes beyond isolated payroll errors. The FWO is examining why non-compliance occurs, how the sector operates, the factors influencing employer behaviour and what measures may create sustainable workplace compliance.
For disability service providers, this should prompt a broader question than whether current hourly rates are correct. Are the industrial relations decisions underpinning payroll (Award coverage, SCHADS sector application, classification, pay point, employment arrangements, rostering rules and entitlement interpretation) correct in the first place?
What the inquiry is doing, and what comes next
The FWO describes the Disability Support Services Sector Inquiry as a multi-year process. Its initial stages involve fact-finding, consultation with stakeholders and industry partners, identifying patterns of behaviour and understanding the barriers to workplace compliance.
The next stages will move beyond consultation. The FWO says it intends to provide targeted education in areas most in need and investigate non-compliance, including what it describes as the most concerning behaviours. Where contraventions are identified, the regulator has a range of compliance and enforcement responses available, including compliance notices, enforceable undertakings and civil litigation. Suspected intentional criminal underpayment offences can also be investigated and referred for consideration of criminal prosecution.
One of the inquiry's stated aims is to make it easier for employers to comply with the Social, Community, Home Care and Disability Services Industry Award 2010 (SCHADS Award). The FWO has also identified an objective of employers and organisations becoming committed to self-reporting non-compliance and implementing sustainable compliance measures.
For providers, the inquiry reinforces the importance of looking beyond whether payroll is processing the numbers it has been given. The underlying industrial relations framework needs to be correct first.
Where SCHADS non-compliance actually occurs
Payroll compliance under the SCHADS Award is not simply a question of loading the annual Award rates into payroll.
A compliant payroll outcome relies on a series of industrial relations determinations being correct before payroll is processed. This includes identifying the correct industrial instrument, determining which SCHADS sector applies, classifying the employee correctly and then interpreting how the Award applies to the employee's actual pattern of work.
Award coverage and SCHADS sector application
Determining that the SCHADS Award applies is only the first step.
For disability providers, one of the most important, and sometimes overlooked, questions is which sector of the SCHADS Award applies to the work being performed.
The coverage question is not simply "Does SCHADS apply?" It is also "Which part of SCHADS applies to this employee and the work they are actually performing?"
In particular, providers may need to distinguish between employees working within the Social and Community Services sector and employees working within the Home Care sector.
The distinction is not simply administrative. It determines the applicable classification structure and can affect the way other Award provisions operate.
The Social and Community Services sector includes the provision of disability services, including personal care, therapeutic care and domestic and lifestyle support to a person with disability in community and residential settings, including respite centres and day services.
The Home Care sector is separately defined and covers the provision of personal care, domestic assistance or home maintenance to an older person or person with disability in a private residence. Within the Home Care sector, the Award now contains separate classification structures for home care disability care employees and home care aged care employees.
Critically, the fact that a disability support worker performs services in a participant's private home does not automatically mean the employee falls within the Home Care sector. The SCHADS Award expressly provides that an employee is not precluded from being engaged under the Social and Community Services classification structure merely because they provide services in a private residence or through outreach.
This means that location alone should not determine sector application.
For disability providers operating across supported independent living, residential services, community participation, in-home support, respite or other service models, the industrial relations assessment may require consideration of the nature of the service being delivered, the client cohort, the organisation's service model and the work actually performed.
This is particularly important where one provider operates across multiple service streams. It should not automatically be assumed that every support worker belongs in the same SCHADS sector simply because they hold the same internal job title.
A sector determination can flow directly into:
- the applicable classification schedule
- minimum rates and pay points
- classification progression
- minimum engagement requirements
- broken shift provisions
- rostering arrangements
- other sector-specific Award entitlements.
If the sector determination is wrong, the payroll system can still calculate exactly as configured while consistently applying the wrong Award rules.
If the sector determination is wrong, the payroll system can still calculate exactly as configured while consistently applying the wrong Award rules.
The coverage question is therefore not simply "Does SCHADS apply?" It is also "Which part of SCHADS applies to this employee and the work they are actually performing?"
SCHADS classification and pay point
Once the correct sector has been determined, the next question is classification.
Classification is more technical than matching an internal job title to an Award level. Under the SCHADS Award, the applicable classification should be assessed against the relevant classification descriptors and the substance of the work being performed.
Depending on the applicable sector, this can include consideration of duties, responsibility, skills, qualifications, experience, autonomy, decision-making and the level of supervision exercised or received.
For Social and Community Services employees, the Schedule B classification structure is materially different from the home care disability care classification structure. An incorrect sector assessment can therefore lead directly to an incorrect classification and minimum rate.
The risk is also not limited to an employee being incorrectly classified when they commence employment. Roles evolve. Employees take on more complex duties. Qualifications change. Supervisory responsibilities increase. Service models are redesigned and positions are restructured.
Where the Award classification is not revisited as the role changes, an assessment that may once have been appropriate can become incorrect over time.
Pay point progression also requires attention. Providers need to understand whether progression within a classification applies, when it is triggered and whether any Award conditions attached to progression have been satisfied.
A relatively small classification or pay point difference can become a substantial exposure where it applies across a workforce cohort and continues over several years.
Minimum engagements and broken shifts
Disability service rosters frequently involve short periods of client-facing work, multiple engagements during a day and gaps between periods of work.
These arrangements need to be assessed against the SCHADS Award rather than simply paid according to the duration of each client booking.
Minimum engagement provisions can apply to particular part-time and casual employees. Broken-shift provisions may also apply to Social and Community Services employees undertaking disability services work and to Home Care employees, subject to the Award requirements.
Depending on the roster, the compliance assessment may need to consider:
- whether the gap is an unpaid break or creates a broken shift
- the number of separate work periods
- minimum payment requirements
- the applicable broken shift allowance
- the total span of the shift
- when overtime is triggered.
A payroll system that simply receives two client appointments and pays the recorded service time may therefore underpay an employee even though every recorded minute of client contact has technically been paid.
The industrial relations question comes first: what does the Award require for that pattern of work?
The industrial relations question comes first: what does the Award require for that pattern of work?
Sleepovers and work performed during sleepovers
Sleepovers remain another technically sensitive area under the SCHADS Award, particularly following changes applying from an employee's first full pay period starting on or after 1 June 2026.
The current provisions affect how work immediately before and after a sleepover is treated and how ordinary hours, overtime and shift allowances can interact with a sleepover arrangement.
Where employees perform work during the sleepover period, additional payment obligations may arise. Providers therefore need processes that allow employees to accurately record interruptions and work performed overnight.
This creates an important interface between rostering, time capture and payroll configuration. If an employee performs work during a sleepover but that information is not captured by the rostering or timekeeping system, payroll may never receive the information required to calculate the entitlement.
A correctly configured payroll system cannot compensate for incomplete operational data.
Travel between clients
Travel is another area where payroll outcomes depend on the underlying industrial relations assessment.
Where employees are required to travel between clients in the course of their duties, that travel can attract payment obligations under the SCHADS Award depending on the circumstances. Vehicle-related allowances may also apply where the Award requirements are satisfied.
Providers need to distinguish between:
- ordinary travel from home to the first workplace or client
- travel undertaken during the working day
- travel between clients
- unpaid breaks between engagements
- circumstances where an employee is required to use their own vehicle.
This becomes particularly important where a rostering system treats client service hours and travel as separate operational items but payroll is configured only to pay the client-facing component.
Overtime, penalties and shiftwork
A correct base hourly rate does not establish overall payroll compliance.
The Award must also be correctly interpreted to determine when overtime, weekend penalties, public holiday rates, afternoon or night shift provisions and other loadings are triggered.
The risk increases where employees work across different clients, locations or work periods within the same day. The entitlement may depend on the employee's overall pattern of work rather than how each individual client booking appears in the roster.
A rostering platform may view two engagements as separate appointments. The Award may require them to be considered as part of a broader working arrangement.
A rostering platform may view two engagements as separate appointments. The Award may require them to be considered as part of a broader working arrangement.
The payroll rule therefore needs to reflect the industrial instrument rather than simply mirror the way the service delivery system records the shift.
Allowances and higher duties
SCHADS payroll compliance also requires consideration of allowances and additional duties.
Depending on the employee's work, entitlements may arise in relation to matters such as broken shifts, sleepovers, on-call arrangements, travel or vehicle use and higher duties.
Unlike a base rate, these payments can depend on a particular event occurring during a shift.
This means the organisation needs to understand not only what the Award entitlement is, but also what operational event triggers it and how that information reaches payroll.
If the roster, payroll or time-and-attendance platform is not configured to identify the triggering event, the same entitlement can be missed repeatedly across multiple employees and pay periods.
Above-Award rates, salaries and set-off arrangements
Paying an employee above the Award does not automatically remove Award compliance risk.
Where an organisation relies on an above-Award hourly rate or salary to satisfy particular Award entitlements, the contractual arrangements and the operation of the payment need to be carefully assessed.
The organisation should be able to identify which Award entitlements the remuneration arrangement is intended to satisfy and whether the arrangement actually operates effectively against the employee's working pattern.
An hourly rate may appear comfortably above the Award minimum when compared only to the employee's base rate. The position can look very different once overtime, weekend penalties, shift loadings, broken shift allowances and other entitlements are taken into account.
The contractual documentation, Award obligations and actual payments therefore need to be assessed together.
Where an Individual Flexibility Arrangement or another formal flexibility mechanism is being relied upon, the organisation also needs to confirm that the arrangement satisfies the requirements of the applicable industrial instrument and continues to operate as intended.
Record keeping and payroll evidence
Compliance is also about being able to substantiate the payment.
The Fair Work framework imposes record-keeping and payslip obligations. Providers therefore face risk not only where an amount has been paid incorrectly, but where they cannot demonstrate the hours worked, overtime, penalties, loadings, allowances or other information relevant to establishing that the employee was paid correctly.
This is particularly important where different systems are used for rostering, time and attendance, client billing and payroll.
The organisation should be able to reconcile those systems and explain how the employee's actual work pattern produced the payment appearing on the payslip.
A payroll result that cannot be traced back to reliable roster and time records creates both a payroll assurance issue and a potential record-keeping risk.
Recent enforcement activity shows how quickly exposure can grow
The FWO inquiry is occurring against the backdrop of substantial enforceable undertakings involving organisations operating across disability, care and community services.
A review of relevant FWO matters published during the first seven months of 2026 found that enforceable undertakings involving care, disability and community services organisations collectively exceeded $27.6 million in remediation, interest and superannuation, affecting more than 11,000 current and former workers.
$27.6 millionin enforceable undertakings across care, disability and community services, first seven months of 2026
The financial figures are significant, but the more important lesson is how the issues developed.
In one published 2026 disability services matter, a casual employee queried whether the correct shift loading was being paid. That question prompted a broader review, including engagement of an external consultant, and the organisation subsequently self-reported the identified non-compliance to the FWO.
The resulting remediation involved $2.05 million for more than 1,300 current and former employees, with identified issues extending across approximately six years.
The significance is not simply that one entitlement was incorrectly calculated. One employee question exposed a systemic issue that had been repeatedly applied through the organisation's industrial relations and payroll framework.
Underpayments can now carry more than a remediation liability
The regulatory environment surrounding wage compliance has materially changed.
Where an underpayment is identified, the financial exposure may extend well beyond calculating and paying the amount owed to employees. Depending on the nature of the contravention and the conduct involved, organisations and individuals can face civil penalties, the serious contravention provisions, accessorial liability and, in cases involving intentional underpayment, potential criminal prosecution.
These concepts should not be conflated. An inadvertent Award interpretation or payroll configuration error is not automatically "wage theft" or criminal conduct.
However, the consequences can escalate substantially depending on what occurred, what the organisation knew and how it responded once a potential compliance issue became apparent.
Serious contraventions: knowing or reckless conduct
The civil penalty regime is particularly relevant from a governance perspective.
Since February 2024, the threshold for a serious contravention under the Fair Work Act has changed. A serious contravention can arise from knowing or reckless conduct; the previous requirement that the contravention also form part of a systematic pattern was removed.
Maximum penalties have also increased for selected civil remedy contraventions involving non-small-business employers, including breaches relating to Award and enterprise agreement obligations, the National Employment Standards, record keeping and payslips.
This creates an important distinction between identifying a potential compliance issue and actively investigating and rectifying it, compared with allowing a known or obvious issue to continue unchecked.
Ignoring the issue because the payroll system has "always done it that way" is increasingly difficult to reconcile with an effective compliance framework.
From a governance perspective, once a credible concern is raised about Award interpretation, classification or payroll configuration, the organisation should have a process for determining whether the concern is isolated or systemic.
Ignoring the issue because the payroll system has "always done it that way" is increasingly difficult to reconcile with an effective compliance framework.
Intentional underpayment can be a criminal offence
From 1 January 2025, intentional underpayment of wages or entitlements can constitute a criminal offence under the Fair Work Act.
The offence does not criminalise honest mistakes. Intent is fundamental.
Broadly, the offence can arise where an employer is required to pay an amount and intentionally engages in conduct that intentionally results in the amount not being paid when it is due.
The consequences are substantial.
For a company, the maximum criminal fine can be the greater of three times the amount of the underpayment or $9.1 million, where the underpayment amount can be determined.
For an individual, conviction can result in up to 10 years' imprisonment, a fine, or both. Where the underpayment can be determined, the maximum fine can be the greater of three times the underpayment or $1.82 million.
The FWO can investigate suspected criminal underpayment offences and, where appropriate, refer matters to the Commonwealth Director of Public Prosecutions or Australian Federal Police for consideration of criminal prosecution.
Again, an incorrect SCHADS interpretation does not automatically become a criminal matter. However, the introduction of the offence substantially increases the importance of how organisations respond once they become aware that employees may not be receiving their correct entitlements.
Personal and accessorial liability: the company is not always the end of the matter
Another important industrial relations risk is the potential for liability to extend beyond the employing entity.
Section 550 of the Fair Work Act contains accessorial liability provisions.
A person or another company can potentially be held responsible where they were sufficiently involved in an employer's contravention. Where accessorial liability is established, that person or entity can be treated in the same way as the employer and may be exposed to orders involving unpaid wages and entitlements as well as civil penalties.
Potential accessories can include:
- company directors
- HR managers and other managers
- payroll officers
- accountants
- advisers and bookkeeping services
- other businesses involved in the supply chain.
Holding one of these positions does not automatically result in liability.
The issue is the person's involvement in the particular contravention. This can include assisting, recommending or causing the contravention, influencing it, being knowingly concerned in or party to it, or conspiring with others in conduct that results in the contravention.
The more fundamental issue is whether those responsible for making or implementing industrial relations and payroll decisions understand the legal framework they are applying.
This has two important consequences for providers.
First, directors and senior managers should not assume that a wage compliance concern can simply be delegated to payroll and treated as an administrative matter.
Second, outsourcing payroll does not outsource the employer's compliance obligations. Payroll providers, accountants and advisers can themselves potentially face accessorial liability where the statutory test is satisfied, but the employer remains responsible for understanding and meeting its workplace obligations.
The more fundamental issue is whether those responsible for making or implementing industrial relations and payroll decisions understand the legal framework they are applying.
Why proactive audits matter from a governance perspective
The criminal underpayment regime has also placed greater focus on the existence of genuine compliance systems.
For small business employers (fewer than 15 employees), the Voluntary Small Business Wage Compliance Code provides a useful example of the compliance behaviours the regulator considers when assessing whether an underpayment was intentional.
Relevant considerations include whether the employer took reasonable steps to determine correct rates and entitlements, attempted to stay up to date with workplace law changes, relied on accurate information, sought assistance from reliable sources, rectified underpayments and cooperated with the regulator.
The FWO's guidance on the Code gives a payroll error being identified during a quarterly business audit as an example of a factor that may be relevant.
The Code applies only to small business employers with fewer than 15 employees. Where the FWO is satisfied that a small business employer has complied with the Code in relation to an underpayment, it cannot refer that conduct for possible criminal prosecution. The Code does not prevent other enforcement action, including civil proceedings, and it does not provide the same criminal referral protection to employers with 15 or more employees.
However, the broader governance principle is relevant to providers of all sizes: compliance should be something the organisation can demonstrate it actively manages rather than something it simply assumes.
A proactive audit does not guarantee that an organisation will never identify an underpayment. Its value is that it creates a structured process for testing compliance, identifying potential weaknesses and responding before an issue continues unchecked.
What an enforceable undertaking can actually involve
Where significant workplace contraventions are identified, an enforceable undertaking can involve considerably more than repaying employees.
An enforceable undertaking is a legally enforceable written agreement between the FWO and a person or organisation that has not complied with workplace laws. The FWO can use an undertaking instead of commencing court proceedings where it considers that approach appropriate.
Typical obligations can include:
- acknowledging workplace law contraventions
- rectifying underpayments
- paying applicable interest and superannuation
- commissioning independent payroll or workplace compliance audits
- undertaking workplace relations training
- improving payroll, timekeeping and compliance systems
- reporting progress and compliance measures to the FWO
- establishing mechanisms through which employees can raise pay concerns
- issuing public notices or apologies
- implementing ongoing monitoring and governance measures.
Enforceable undertakings are also published publicly by the FWO.
If an organisation does not comply with the undertaking, the FWO can apply to a court to enforce its terms.
The true cost of an historical underpayment can therefore extend well beyond the original wages owed. It may involve interest, superannuation, external audit and remediation costs, payroll system changes, management resources, workplace relations training, regulatory reporting and reputational consequences.
The key compliance questions for disability providers
The FWO inquiry does not mean every disability provider has an underpayment.
It does mean providers should be able to explain and substantiate the industrial relations decisions sitting behind payroll.
A provider should be able to answer questions such as:
- Does the SCHADS Award actually cover each workforce cohort?
- Where SCHADS applies, is the employee properly within the Social and Community Services sector, the Home Care sector, or another sector?
- Has sector application been determined from the nature of the service and work performed rather than simply where the service takes place?
- Where Home Care applies, is the employee within the correct Disability Care or Aged Care classification structure?
- Why has each employee been allocated to their particular classification and pay point?
- Have classifications been reviewed as duties, qualifications and responsibilities have changed?
- Is pay point progression being correctly applied?
- Do part-time and casual arrangements comply with minimum engagement requirements?
- Are broken shifts being correctly identified and paid?
- Have the 1 June 2026 sleepover changes been reflected in rostering and payroll?
- Is work performed during sleepovers accurately recorded and paid?
- Is travel between clients correctly characterised and paid?
- Are overtime, penalties, shift loadings, allowances and higher duties being triggered correctly?
- Do above-Award rates, salaries and set-off arrangements operate as intended against actual working patterns?
- Can payroll outcomes be reconciled to roster and timekeeping information?
- Are employment and payroll records sufficient to demonstrate compliance?
- Who is responsible for monitoring Award changes and determining whether payroll rules need to be updated?
- When was the underlying Award coverage, sector and classification framework last independently reviewed?
These are industrial relations questions first and payroll questions second.
When did you last independently test your IR and payroll framework?
The FWO's Disability Support Services Sector Inquiry places renewed regulatory attention on workplace compliance across the sector. At the same time, increased civil penalties, the serious contravention regime, criminal underpayment laws and accessorial liability have increased the consequences where wage compliance is not appropriately managed.
Effective HR works extensively with disability, home care and community services providers and specialises in SCHADS Award interpretation and industrial relations compliance.
Our Payroll Audit service starts with the industrial relations framework, including Award and enterprise agreement coverage, SCHADS sector application, classification, pay points, contractual arrangements and entitlement interpretation, before testing whether rostering, time-and-attendance and payroll systems are applying those requirements correctly in practice.
The objective is not simply to determine whether the numbers add up.
It is to determine whether the industrial relations assumptions producing those numbers are correct, whether payroll is applying them correctly and whether the organisation has the governance and systems required to maintain compliance.
This article contains general information only. Award coverage, sector application, civil, criminal and accessorial liability depend on the particular facts and circumstances of each matter. Specific advice should be obtained where required.
Sources: Fair Work Ombudsman, Disability Support Services Sector Inquiry, and the FWO media release announcing the inquiry (29 July 2025); Social, Community, Home Care and Disability Services Industry Award 2010; Fair Work Ombudsman guidance on SCHADS Award coverage and entitlements, criminal underpayments, serious contraventions, accessorial liability and enforceable undertakings; Fair Work Ombudsman Enforceable Undertakings Register and associated published media releases. Information reviewed 2 September 2026. Aggregate enforcement figures are an aggregation of publicly reported FWO enforceable undertakings and their associated media releases.