Despite the critical role payroll audits play in maintaining compliance and accuracy, 32% of businesses feel constrained by time and resources when it comes to conducting them, according to Yellow Canary’s 2025 State of Payroll Compliance Report. Yet without regular audits, small payroll errors can quickly escalate into costly compliance breaches, financial liabilities, and reputational risk.
In collaboration with Andrew Crealy, Managing Partner from FifthEagle, a commercial consulting firm, this blog explores why audit frequency matters, how often payroll should be reviewed, and how organisations can develop a practical, risk-based audit plan — even with limited internal capacity.
Why frequent payroll audits matter
Payroll is a thankless task. No one ever calls just to say thank you for getting their pay processed — but everyone notices when something goes wrong.
According to Andrew Crealy, that is part of the challenge facing payroll teams today. “Finding and retaining highly competent payroll professionals is hard — and getting harder,” he notes. “Payroll legislation changes at least once a year, and it is complex.”
When payroll is not reviewed regularly, minor, innocent mistakes can compound into major risks — damaging employee trust and the reputation of company directors.
For example, a simple $20 underpayment per week, if left unresolved, could escalate to $960 per employee over the course of a year, or if undetected for even longer. Multiply that across multiple awards, teams or departments, and the potential financial exposure increases significantly. What seemed like a small error can expose directors and organisations to:
- Back pays
- Additional PAYG (and fines and penalties)
- Additional superannuation (and fines and penalties)
- Additional payroll tax (and fines and penalties)
- Additional workers compensation premiums (and fines and penalties)
As Andrew Crealy puts it, “Can you afford to not to conduct payroll audits? Frequent audits reduce this risk and allow directors to sleep at night. They catch discrepancies early, limit the cumulative impact of errors, and enable quicker remediation — all before issues become costly or reputationally damaging.“
Our 2025 research reinforces this point, showing a strong correlation between audit frequency and confidence in payroll accuracy:
- Monthly audits → 54% of businesses report high confidence
- Quarterly audits → 55%
- Annual audits → 42%
The data highlights a clear trend: businesses auditing only once a year are much more likely to miss hidden compliance risks.
Choosing the right payroll audit frequency
There is no universal rule for how often to audit payroll.
Andrew Crealy adds, “Good companies complete balance sheet reconciliations monthly, maybe there is some lessons in that? Why? Because regular review catches issues early, builds accuracy, and drives better decisions.”
Cadence should align with how organisations calculate entitlements and processes corrections.
For example:
- Weekly or fortnightly pay: Audit every 28 days (to align with common entitlement periods such as overtime cycles)
- Monthly pay: Audit monthly
- Enterprise Agreements or awards: Monthly audits with quarterly reconciliations, where required
Audit frequency should also reflect the timing of top-up payments. If payroll adjustments are processed monthly, auditing quarterly may be too infrequent to catch and correct issues in time.
How to build a smart, sustainable audit plan
Even for resource-constrained organisations, it is possible to adopt a structured and scalable approach to payroll audits. Here is a practical framework to get started:
- Prioritise high-risk areas — such as shift workers, overtime, or complex awards
- Align audits to entitlement periods — avoid cycles that are too short to capture accurate results
- Start small, then scale — even quarterly audits in key areas are a strong first step
- Automate audit workflows — reduce manual load and flag issues in real time
- Assign ownership — embed audit reviews into BAU processes and establish accountability
Andrew Crealy adds, “A well-designed audit plan is simple and frequent, which mitigates risk and becomes part of the normal routine. Governance is no longer boring, it is critical and should be part of the business-as-usual timetable.
If we make payroll audits regular, it does not become a time impost and avoids unnecessary complexity. Addressing work done last week or last month is much easier to reconcile than work completed two years ago, probably by someone else.“
Let technology and advisory firms do the heavy lifting
Capacity is often the biggest barrier to frequent payroll audits — but with the right tools and partners, it does not need to be.
Audit automation platforms can flag exceptions, track issue resolution, and deliver consistent insights at scale. When paired with the strategic guidance of an experienced commercial consulting firm, this approach allows organisations to proactively manage payroll risk without increasing operational burden.
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*Yellow Canary and FifthEagle have partnered to help businesses across Australia better navigate the evolving payroll compliance landscape.
