HR and payroll for manufacturing in Australia
Reviewed by Mellow Editorial Team, HR & payroll content team
Manufacturing businesses face a distinct set of payroll and HR obligations: award-covered shift workers, complex penalty rates, fatigue management rules, and a workforce that often spans full-time, casual and labour-hire arrangements simultaneously. Get these wrong and the exposure is significant — underpayment claims in manufacturing have been among the largest in recent Fair Work audit cycles.
Awards and enterprise agreements
Most manufacturing workers are covered by the Manufacturing and Associated Industries and Occupations Award 2020 (the Manufacturing Award). Some employers have moved to enterprise agreements, which must pass the Better Off Overall Test against the Award baseline.
The Award sets minimum rates by classification level (C14 through to C2 and above), plus loadings and penalties for:
- afternoon and night shifts
- weekend work
- public holidays
- overtime beyond ordinary hours
Before you can run payroll accurately, every worker needs a confirmed classification. Misclassifying a toolmaker as a general hand, or running everyone on a flat rate without checking penalty entitlements, is the most common source of underpayments in the sector.
If you operate under an enterprise agreement, document the mapping between agreement clauses and Award provisions. Fair Work inspectors will ask for it.
Shift work, overtime and annualised salaries
Manufacturing rarely runs a standard Monday-to-Friday, 9-to-5 roster. Most sites run two or three shifts, and the Award contains specific rules for each:
- Afternoon shift (finishing after 6 pm and at or before midnight): a 15% loading on the ordinary rate
- Night shift (finishing after midnight or starting before 6 am): a 30% loading
- Rotating shift work: specific provisions apply depending on whether the employee works all three shifts across a roster cycle
Overtime rates apply once an employee exceeds ordinary hours on a given day or week, and double-time rates can apply on Sundays and public holidays depending on the agreement.
Some manufacturers use annualised salary arrangements to simplify this. The Award allows it, but the employer must do an annual reconciliation to verify the annualised salary actually covered all the penalties and overtime the employee worked. If there is a shortfall, the employer must pay the difference within a set timeframe. Keep timesheets regardless — they are your evidence if a reconciliation is ever disputed.
PAYG withholding, super and STP
The core payroll mechanics apply in manufacturing just as elsewhere. You withhold income tax progressively under PAYG at each pay run, remit the 2% Medicare levy, and check each employee's tax file declaration for any HECS/HELP repayment obligation (calculated on a banded scale against their repayment income).
Superannuation Guarantee sits at 12% of ordinary time earnings from 2026. In a shift environment, "ordinary time earnings" is worth understanding carefully: shift loadings that are part of ordinary hours count toward the super base; most overtime payments do not. If you are uncertain, the ATO's guidance on OTE is the reference point.
Every pay event must be reported to the ATO through Single Touch Payroll (STP) in real time. Year-end finalisation for the 2026/27 year must be completed by 14 July 2027. For manufacturers running weekly or fortnightly payroll across multiple shifts, STP compliance is straightforward in most modern payroll platforms but requires your pay codes to be mapped correctly — overtime coded as OTE will inflate super obligations.
Casuals, labour hire and workforce mix
Manufacturing sites commonly blend direct employees, casual employees, and workers supplied through labour hire firms. Each arrangement carries different obligations.
Casual employees under the Fair Work Act now have a clearer pathway to conversion to permanent employment after a qualifying period of regular and systematic work. Since the changes that came into force in recent years, employers must also issue a Casual Employment Information Statement at the start of employment and again at set intervals.
Labour hire workers are legally employed by the labour hire firm, not you. However, the host employer still carries WHS duties of care. You are also responsible for ensuring the labour hire firm is licensed if your state requires it — Victoria, Queensland, South Australia and the ACT all have labour hire licensing regimes.
Maintain clear records of who is on site, under what arrangement, and which Award or agreement covers them. An underpayment liability can sit with a labour hire firm, but reputational exposure lands on the host.
WHS, fatigue and HR recordkeeping
Manufacturing is a high-risk industry under work health and safety law. Beyond the headline WHS obligations, HR and payroll intersect in two specific ways.
First, fatigue management: rosters that consistently push workers to excessive hours create both a WHS exposure and an Award compliance risk. Some enterprise agreements include specific maximum consecutive shift provisions. Your payroll system should flag when an employee is approaching those limits.
Second, recordkeeping: under the Fair Work Act, pay records must be kept for seven years and must include hours worked, pay rates, loadings, and super contributions made. In a shift environment with multiple pay codes, this means your payroll data needs to be granular enough to reconstruct what any individual was paid and why — not just the total figure on the payslip.
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