The NAB underpayment: A reminder of payroll’s indispensable role

When a major employer like the National Australia Bank (NAB) discovers it has underpaid staff, it’s more than just a financial blip, it’s a stark reminder that payroll is far from a back office triviality. Wielding both legal and human implications, payroll must be recognised as a core organisational function, demanding technical expertise, robust compliance, and unwavering diligence.

The situation at NAB

In its latest trading update published 18 August 2025, NAB revealed it will incur up to $130 million this financial year to rectify underpayments identified during a payroll review that dates back to 2019. That figure, nearly 4.5 per cent of its operating expenses, exposes not only the scale of the issue, but also the systemic nature of the failures in NAB’s payroll operations.

Despite offering few details about the number of employees affected or the individual nature of the errors, NAB’s Group Executive for People and Culture, Sarah White, stated that “paying our colleagues correctly is an absolute priority”.

This is not NAB’s first payroll misstep, between 2020 and 2022, the bank had already spent $250 million addressing similar errors dating back to 2012.

The Finance Sector Union has labelled the issue “systemic wage theft” and is calling for stronger protections to ensure compliance and transparency. One might argue the most costly element in this case isn’t just the dollar figure, but the reputational damage to a brand that handles the finances of millions of Australians.

What this tells us about the value of payroll

1. Payroll is knowledge heavy and high risk

Ensuring accurate calculations across hours, entitlements, allowances and superannuation, particularly under complex awards and enterprise agreements, requires highly specialised expertise. When there are gaps in this knowledge, the risk of non-compliance increases exponentially.

2. Compliance is not optional

Underpayments don’t just result in financial damage, they erode trust and bring legal consequences. With both the Fair Work Ombudsman and unions now closely scrutinising employer behaviour, organisations must recognise that robust compliance practices are not optional, they are essential. Proper documentation, audit trails and accountability frameworks are non negotiable.

3. Payroll must evolve with technology and agreements

Part of NAB’s latest error coincided with the rollout of a new enterprise agreement and HR system upgrades. Any system or agreement change must be accompanied by rigorous testing, strong governance, and qualified personnel who understand both the systems and the industrial framework they operate in.

4. Proactive oversight prevents reactive crises

Payroll should never be reactive. Organisations need to conduct regular process reviews, compliance audits, and scenario testing to catch issues before they escalate into public scandals. Payroll teams must be empowered to speak up, identify risks, and prevent problems, not just process payments.

Insights from Profit from Payroll

As I outlined in Profit from Payroll, payroll is not simply transactional, it is strategic. It directly impacts morale, compliance, and brand integrity. The NAB case reinforces key principles that every payroll leader should champion:

• Prioritise qualifications: Only well qualified payroll professionals have the technical depth to navigate complex legislation and system transitions.
• Understand true payroll costs: Beyond salaries, the real cost of payroll includes errors, penalties, remediation, and lost trust. Leaders must be aware of these risks when allocating resources.
• Document everything: Every change, process and calculation must be documented, not just to aid compliance, but to create transparency and traceability.
• Assess fraud risk: While this incident appears administrative rather than fraudulent, underpayment environments are often vulnerable to manipulation. Every payroll issue deserves a fraud risk assessment.
• Have a clear remediation plan: When errors do occur, a clear, proactive, and well communicated remediation strategy is vital. It’s not just about money, it’s about trust.

Practical guidance for payroll professionals

The NAB underpayment should be a wake up call for employers across the country. Here’s what you should be doing today:

1. Review historical data, particularly after any agreement or system changes.
2. Conduct independent compliance audits, ideally with external validation.
3. Ensure change control procedures are in place, and every modification to payroll configuration is signed off with documented testing.
4. Invest in ongoing education for payroll teams, particularly in interpreting awards, applying leave and termination rules, and understanding system capabilities.
5. Engage constructively with Australian Payroll Association and regulators, collaboration is far less costly than conflict.

The NAB underpaymentis a cautionary tale for every organisation that employs people in Australia. Payroll is not an administrative function, it is a critical risk area and a key contributor to employee engagement and brand trust.

It’s time to stop asking payroll professionals whether they’ve simply pushed a button. There is no legendary button. There is, however, a highly technical, compliance heavy profession behind every correct payslip.