Introduction
Staying compliant with Australian workplace laws has never been more important or more complex. Between updated modern awards, new rules for casual employment, fixed-term contracts, psychosocial hazards, and increased enforcement activity, many employers simply don’t know whether they are compliant. The Fair Work Ombudsman provides ongoing updates on these obligations (fairwork.gov.au).
That’s where a HR Compliance Audit becomes invaluable.
It gives you a clear, structured assessment of your employment practices to identify risks before they become legal or financial issues.
In this guide, we’ll walk you through how to conduct a HR Compliance Audit step-by-step, based on the exact methodology used by Liquid HR’s team.
What Is a HR Compliance Audit?
A HR Compliance Audit is a structured review of your organisation’s HR documents, records, systems and practices to ensure they meet the requirements of the Fair Work Act 2009, National Employment Standards, Modern Awards, and relevant WHS legislation. For reference, the Fair Work Commission provides award and classification information (fwc.gov.au).
The goal is to identify:
- Employment risks
- Underpayment or misclassification risks
- Missing or outdated documentation
- Gaps in WHS compliance
- Areas requiring improvement (contracts, policies, processes)
Think of it as a “health check” for your HR function, protecting your business from fines, disputes, and unintentional non-compliance.
Step-by-Step: How to Conduct a HR Compliance Audit
Below is the process used by our HR consultants when conducting a full compliance audit for Australian employers.
Step 1: Review Employment Contracts
Employment contracts must reflect:
- National Employment Standards (NES)
- The Fair Work Act (2009)
- Any applicable Modern Award
- Current legislation (e.g., Right to Disconnect, casual employment rules)
Guidance on contract essentials is available via Business.gov.au (business.gov.au).
Your audit should check:
- Do all employees have signed contracts?
- Are casual contracts aligned with the current casual definition?
- Do fixed-term contracts follow the correct fairwork rules?
- Are pay secrecy clauses removed?
- Are position descriptions attached and signed?
Red Flag: Outdated templates are the #1 cause of non-compliance.
Step 2: Review Position Descriptions
A compliant PD should:
- Clearly describe responsibilities
- Align with the organisation’s structure
- Match the employee’s actual duties
- Support recruitment, performance reviews and remuneration
Check:
- Does every employee have a PD?
- Are PDs accurate and up-to-date?
- Do job titles match contract classifications?
Step 3: Review HR Policies & Procedures
Policies protect both the employer and employee, but only when they are current, implemented and communicated.
Minimum compliance policies:
- Discrimination, Harassment & Bullying
- Grievance Handling
- Code of Conduct
- Leave Policy
- Sexual Harassment (Respect@Work)
- Right to Disconnect
- Recruitment & Selection
- Remuneration & Benefits
- Workplace Flexibility
- Family & Domestic Violence Leave
- Employee Policy Acknowledgement
Best practice policies:
- Employee Induction
- Training & Development
- Internet, Email & Computer Use
Red Flag: Having a policy is NOT the same as implementing it. Auditors look for evidence that staff receive, understand and sign policies.
Step 4: Review Employee Records
Under Fair Work rules, you must keep records for 7 years. Requirements are listed on the Fair Work Ombudsman website (fairwork.gov.au).
General records
- Employer name and company ABN
- Employee details
- Commencement date
- Basis of employment
Pay records
- Pay rate
- Gross & net amounts
- Allowances, penalties, loadings
- Bonuses or incentive payments
Hours of work
- Overtime hours
- Time off in lieu agreements
- Averaging agreements
Leave records
- Leave taken & balances
- Agreements to take leave in advance
- Cashing-out agreements
Superannuation records
- Contributions
- Dates paid
- Fund name
Other
- Individual flexibility agreements
- Guarantees of annual earnings
- Termination records
Super guidance is also available via the ATO (ato.gov.au).
Red Flag: Missing or incomplete records can lead to Fair Work fines, regardless of whether employees were actually underpaid.
Step 5: Review Workers Compensation Insurance
Your audit should check:
- Is current coverage active in all operating states?
- Is your WIC code correct?
- Does the policy match your true workforce risk profile?
Workers compensation requirements vary by state – state regulators are accessible via Business.gov.au (business.gov.au).
Red Flag: Incorrect WIC codes are a common and costly mistake.
Step 6: Review Payslip Compliance
Payslips must include:
- Legal employer name and ABN
- Pay period
- Payment date
- Hourly rate (if applicable)
- Gross & net pay
- Superannuation contribution + fund name
- Itemised allowances/penalties
Red Flag: Bundling allowances or penalties into the hourly rate is a common non-compliance issue.
Step 7: Review WHS / OHS Compliance
A high-level WHS audit includes reviewing whether your business has:
WHS Requirements:
- WHS policy
- Consultation mechanisms (e.g., safety committee)
- Hazard/incident reporting process
- Risk management procedures
- WHS training & induction
- Emergency management + first aid plan
- Psychosocial risk management
- Return-to-work program and coordinator
Guidance is available at Safe Work Australia (safeworkaustralia.gov.au).
Red Flag: Psychosocial hazards (e.g., stress, workload, bullying) are now a legal compliance requirement
Common Compliance Gaps
During audits across, these issues appear again and again:
- Wrong Modern Award classification
- Incorrect casual loading wording or outdated casual definition
- Incorrect or missing super for contractors
- Missing or incomplete employee records
- Payslips missing mandatory fields
- No policy acknowledgement process
- Outdated HR policies
- Missing WHS training or induction
- Incorrect fixed-term contract usage
- Poor hazard and psychosocial risk management
If your business has more than two of these, you should consider a formal audit.
Frequently Asked Questions
1. How often should you conduct a HR Compliance Audit?
Every 12 months or after significant legislative changes.
2. Who should conduct the audit?
Ideally:
- A senior HR professional
- An external HR consultancy (higher objectivity & compliance expertise)
3. How long does the audit take?
Typically:
- 1 day for small businesses
- 3 days for medium to large organisations
4. What happens after the audit?
You receive:
- A findings report
- A compliance gap analysis
- Prioritised recommendations
- A practical action plan
If You Need Support
If you’d like help reviewing your HR documentation, employee records or WHS practices, Liquid HR can support you with a comprehensive HR Compliance Audit tailored to your organisation.
If you’re looking to take the next step, our HR Audit page outlines the different types of audits we offer and how they can support your organisation: Explore HR Audit Services
