Board members face personal risk as school payroll laws shift

Recent changes to payroll compliance laws are creating new challenges for Australian schools, with personal liability now extending to directors and board members for payroll mistakes.

From the start of this year, those in supervisory roles in schools face direct criminal liability for errors related to payroll - a shift described as one of the most significant in school governance for decades. Although the legal update may appear as a minor adjustment to Fair Work regulations, its implications reach much further, particularly within the education sector, which is characterised by complicated employment arrangements and persistent staff shortages.

New liability for boards

The law means what were previously seen as routine administrative tasks now carry serious risks for decision-makers. Staffing in schools is complex; teacher shortages, increasing reliance on casual staff and legacy payroll systems all contribute to an environment where errors can arise more readily.

Discovery Consulting, a company providing cloud and on-premise human capital management technology, analysed the scale of the issue in its latest white paper. According to its research, payroll problems can have widespread impacts both within and beyond financial reporting.

As stated in the white paper, "When parents think about what determines their child's success at school, payroll systems rarely come to mind. Yet they are quietly fundamental to how education works. A misclassified casual teacher or an expired accreditation can ripple out to affect not only compliance but also the stability of classroom learning."

Financial risk and historical context

Discovery Consulting's research, Navigating Compliance Risks in School Workforce Management, highlights that about 20 per cent of employers admit to payroll errors. For schools, where staff wages comprise nearly half of total spending, even minor mistakes can cost millions in back payments. The University of Melbourne faced a wage repayment bill of AUD $72 million - an example of the consequences when payroll errors accumulate over time.

With personal liability provisions now in effect, the consequences for board members go beyond financial losses or damage to reputation. They represent a direct risk to those overseeing the management of the education system.

Teacher shortages exacerbate complexity

Australia contends with an annual shortage of approximately 4,000 teachers, and the pace of retirements is rising. Schools, responding to these gaps, are more dependent than ever on casual relief staff. However, this increases the risk of non-compliance due to the intricate arrangements and different award conditions that often apply to the same individual in multiple roles.

The white paper notes, "A single teacher might hold three different contracts across multiple schools in the same system: classroom teacher, sports coach, and after-hours tutor. Each role can fall under different awards, with separate entitlements and leave accrual rules. Without centralised systems, payroll teams resort to manual workarounds – the perfect breeding ground for errors."

Compliance lapses are no longer only a matter of budgets; they affect working conditions and classroom stability. Relief teachers may be less familiar with students and curriculum, reducing continuity, while permanent teachers are required to fill gaps, decreasing preparation time and raising the risk of burnout.

School leaders report that administrative tasks, much of it related to staffing and compliance, are consuming significant time. "According to the Grattan Institute, 77 per cent of principals feel they lack time to support effective teaching. One day each week is swallowed by administrative firefighting, and much of it tied to staffing, rostering, and compliance," the paper states.

Compliance as opportunity

Discovery Consulting argues that, despite the complexities, improved compliance could trigger broader positive change. In one project for a metropolitan network of 200 schools, the firm integrated payroll, certification, and relief teacher booking into a central enterprise system. This resulted in fewer administrative mistakes and faster onboarding, reducing burdens on principals.

The white paper states: "Technology alone is not a panacea. But when combined with clear governance frameworks and board-level accountability, it becomes a powerful enabler. Automated award interpretation can prevent misclassification before it happens. Centralised credential tracking ensures no accreditation slips through the cracks. Real-time dashboards give boards the oversight they need to fulfil their new obligations with confidence."

"Compliance is not simply about avoiding penalties. It is about ensuring that teachers are supported, students experience continuity in learning, and leaders can spend their time on education rather than bureaucracy. In other words, the stakes are not just legal; they are moral."

Looking ahead

Discovery Consulting's research recommends that schools take proactive measures, including investing in integrated workforce management systems and elevating compliance to a regular board agenda item. The report argues this can turn what was once an overlooked risk into a strength that supports educational quality for both staff and students.

"The reality is stark: Australian schools cannot afford to treat payroll compliance as background noise any longer. With directors now personally liable, the risks are too great. But more importantly, the opportunities are too significant."

The choices made by school leadership now will have lasting consequences for the operation of schools and the delivery of education across the country.