How to Prepare for a SCHADS Payroll Audit (NDIS Providers Guide)

This guide accompanies Part 2 of the SCHADS Audit Readiness webinar, which focuses specifically on payroll compliance and reporting.

In Part 1 of the series, the focus was on HR foundations such as onboarding, contracts, and classifications. This article shifts into payroll and explains how HR data flows into payroll outcomes, and how those outcomes are reviewed during an audit.

The focus here is practical and payroll-specific. It covers the payroll reports auditors typically request, how SCHADS award rules are interpreted in payroll, and how to pull together the payroll evidence needed to support an audit.

This guide is designed as a reference for NDIS providers, business owners, finance managers, and payroll administrators who want to revisit key payroll topics without having to search through a webinar recording.

Payroll evidence is a key part of preparing for a SCHADS payroll audit. It is the point where hours worked, classifications, award rules, penalties, and allowances are reflected in paid outcomes and reporting.

During audits, explanations are not enough on their own. Auditors review payroll data and compare:

• Hours worked versus hours paid
• Timesheets versus payroll output
• Pay categories versus SCHADS award rules
  
  

Where classifications, timesheets, or pay categories do not align, discrepancies are identified quickly. That is why this session focuses on showing the payroll reports and evidence auditors typically request.

There are five payroll areas that are consistently reviewed during SCHADS audits. These are also the areas where payroll errors most commonly occur.

1. Pay rates and classification alignment

Auditors check that an employee’s payroll classification aligns with:

• Their employment contract
• Their SCHADS level and pay point
• The duties they are performing

Even a mismatch of one level can result in underpayment findings. This is why alignment between HR records and payroll setup is essential.

2. Penalties, loadings, and overtime

The SCHADS Award includes a wide range of penalty conditions, including:

• Afternoon and night shift penalties
• Weekend and public holiday penalties
• Daily overtime
• Period overtime
• Minimum break rules

Payroll needs to apply these conditions accurately based on hours worked and award rules.

3. Allowances

Allowances are one of the most common sources of SCHADS payroll errors.

This includes allowances such as:

• Broken shift allowance

• Sleepover allowance

• Kilometre allowance

• Overtime meal allowance

• First aid allowance

If allowances are missing or incorrectly configured, underpayments can become significant very quickly.

4. Leave accruals and balances

During audits, leave is reviewed to confirm:

• Accrual rules are correct

• Leave balances are accurate

• Leave loading is applied correctly

• Time off in lieu is tracked appropriately

Incorrect accrual rates and leave loading errors are common audit issues.

5. Superannuation and STP reporting

Payroll audits also include verification of:

• Superannuation calculations
• Eligible earnings categories
• STP reporting accuracy

Auditors compare payroll data to STP year-to-date figures to ensure everything reconciles.

Auditors rely on payroll documentation to review how employees were paid and how award rules were applied.

Payroll evidence commonly requested includes:

• Payroll audit data

• Pay category configuration

• Timesheets and rosters

• Award interpretation evidence

• Leave records

• Superannuation records

• STP submissions

• Employee change history

The following payroll reports are commonly requested during SCHADS audits and are used to review pay outcomes, award interpretation, and compliance.

The videos show where to find each of these reports in Pay Cat.

1. Employee Details Report

This report includes:

• Name and address

• Start date and date of birth

• Tax file declaration details

• Visa and work rights

• Award and employment agreement

• SCHADS classification level and pay point

• Employment type

This report supports the employee records section of your audit pack.

2. Pay Run Audit Report

The Pay Run Audit Report is the core payroll report used during audits.

This report includes:

• Hours worked

• Pay categories applied

• Penalties and allowances

• Leave taken

• Superannuation and deductions

• Gross, taxable, and net earnings

This report allows auditors to trace exactly how payroll outcomes were calculated. It is recommended to export this report for two or three pay runs.

3. Pay Categories and Pay Templates

Auditors want to understand how payroll is configured, not just what was paid.

Pay category and pay rate template exports show:

• Rate multipliers

• Penalty rates

• Allowance configuration

• Whether super applies

• Leave accrual rules

These exports demonstrate how SCHADS award rules are set up in payroll.

4. Timesheet Reports

Timesheet reports are used to support payroll outcomes.

Auditors compare timesheets to payroll to review:

• Start and finish times

• Breaks taken

• Work types

• Sleepover versus active hours

This helps verify overtime triggers, minimum engagements, and allowance eligibility.

5. Roster vs. Timesheet Comparison 

If you use the Pay Cat rostering feature, the roster versus timesheet comparison provides a clear view of how planned shifts compare to actual hours worked.

This comparison is particularly useful during an audit because it allows you to quickly identify and explain differences between rostered hours and submitted timesheets. It gives auditors a clear, system-generated view of where variations occurred, rather than relying on manual explanations or assumptions.

The comparison can be exported and included as supporting payroll evidence where required.

6. Leave Reports

The following reports are commonly used to review leave compliance during a SCHADS payroll audit:

• Leave History Report

• Leave Liabilities Report

These reports provide visibility into leave accruals, leave taken, current balances, and leave costs as at a selected date.

7. Superannuation Reports

Superannuation reports are used to review how super has been calculated and paid through payroll. This includes confirming:

• Super guarantee amounts

• Contribution timing

• Fund details

• Payment status

These reports help confirm that superannuation has been calculated correctly and paid in line with payroll records.

8. STP Year-to-Date Reconciliation

STP year-to-date data can be exported and compared to payroll totals to confirm that reporting is accurate.

The STP report includes:

• Payroll year-to-date figures

• STP year-to-date figures

• A variance tab

Any variance identified needs to be reviewed and reconciled.

9. Employee Audit Report

The Employee Audit Report provides a change log showing:

• When employee records were updated
• Who made the changes
• Changes to classifications, pay rates, or leave rules

This report supports explanations of historical payroll changes during an audit period.

Certain SCHADS award rules are more likely to result in payroll errors and audit questions. These areas require particular care when reviewing payroll data and preparing payroll evidence.

Minimum Engagement Rules 

Under the SCHADS Award, minimum engagement rules apply when an employee works less than the required minimum hours for a shift.

When this occurs:

• Payroll tops up the paid hours to meet the minimum engagement requirement

• The top-up appears as additional paid hours in payroll

• The rate applied matches the employee’s SCHADS classification

This can result in payroll hours exceeding timesheet hours, which is expected when the award is applied correctly.

Overtime Triggers

Under the SCHADS Award, overtime applies based on both daily and period thresholds.

Overtime may be triggered when:

• An employee works more than the daily ordinary hours limit

• An employee exceeds weekly or fortnightly ordinary hour limits

When overtime applies, payroll needs to correctly identify the trigger point and apply the appropriate overtime pay category and rate. Accurate overtime application is commonly reviewed during payroll audits to ensure employees have been paid correctly for extended hours.

Shift Penalties 

Shift penalties under SCHADS depend on when work is performed.

These penalties may apply based on:

• Shift start and finish times

• Whether the shift falls in the afternoon or night period

• Weekend or public holiday work

Payroll applies the relevant penalty rate based on these conditions. During an audit, shift penalties are reviewed to confirm the correct rate was applied for the time worked.

Kilometre Allowance

The SCHADS Award provides for a kilometre allowance when employees are required to use their own vehicle for work-related travel.

In payroll, this allowance is recorded based on the number of kilometres travelled and is paid in line with award conditions. The allowance includes both taxed and untaxed components, which supports correct payroll and STP reporting.

During audits, kilometre allowance records may be reviewed alongside timesheets and travel logs to confirm the allowance was applied correctly.

Broken Shifts

Broken shift allowances apply when an employee works two or more shifts in a single day with a break exceeding one hour between shifts.

When a broken shift occurs:

• A broken shift allowance may apply

• Additional penalties may apply if the total span of hours exceeds 12 hours

Broken shifts are a common focus in SCHADS payroll audits, particularly where support work is delivered across multiple client visits in a day.

Sleepovers

Sleepovers under the SCHADS Award are paid as a fixed allowance rather than an hourly rate.

Key conditions include:

• Active work before and after the sleepover is paid separately

• At least one side of the sleepover includes a minimum of four hours of work

• Sleepover periods are not fixed to specific start and finish times

If minimum conditions are not met, payroll may apply a top-up to ensure award requirements are satisfied. Sleepovers are frequently reviewed during audits due to their complexity and the number of conditions involved.

SCHADS payroll audits require a structured payroll audit pack that brings together the key payroll records used to review compliance.

This typically includes:

• Employee records and contracts
• Timesheets and attendance records
• Payroll reports and payslips
• Leave and allowance documentation
• Superannuation and STP records
  
  

Organising this evidence clearly helps streamline the audit process and makes it easier to respond to information requests as they arise.

Preparing payroll evidence for a SCHADS audit often involves collating multiple reports and supporting records.

Some providers choose to manage this manually using their own internal processes. Others prefer to work from a structured checklist to ensure nothing is missed.

If you prefer to work from a checklist, we’ve created a SCHADS Payroll Audit Checklist that brings together the key payroll reports and evidence outlined in this guide. It’s designed to help you systematically review your payroll setup and confirm you have the required documentation ready.

You can download the checklist here:
https://www.paycat.com.au/schads-audit-payroll-checklist

Using a checklist can help confirm that all required payroll reports, supporting records, and reconciliation steps have been completed before information is provided to an auditor.

In some cases, auditors will ask why a particular penalty, allowance, or top-up was applied, rather than simply confirming that it was paid.

Historical pay runs can show the specific SCHADS award clauses that applied on a given day. This allows you to show:

• Which SCHADS clauses triggered

• Why a penalty or allowance applied

• How payroll interpreted the award rules for that shift

This type of evidence is not usually requested upfront, but it can be useful when explaining differences between timesheets and payroll outcomes, such as minimum engagement top-ups, broken shifts, or sleepover conditions.

Clause-level data can be exported and included as supporting payroll evidence where required.

If you’re preparing for a SCHADS audit, the following resources may be useful alongside this guide.

You can revisit the SCHADS Payroll Audit Readiness webinar (Part 2) on demand to review the payroll reports, award interpretation examples, and audit preparation steps covered in this article.

If you haven’t already, Part 1 of the SCHADS Audit Readiness series focuses on HR foundations, including onboarding, contracts, and classifications. This provides important context for how HR data feeds into payroll outcomes.

To support your preparation, you can also download the following checklists:

• SCHADS HR Audit Compliance Checklist, covering core HR records and documentation commonly reviewed alongside payroll

• SCHADS Payroll Audit Checklist, designed to help you systematically review payroll reports, reconciliations, and supporting evidence

If you’d like to see how Pay Cat supports SCHADS payroll compliance in practice, you can also book a demo with our team. A demo gives you a walkthrough of how payroll reporting, award interpretation, and audit-ready evidence work within Pay Cat payroll, and whether it’s the right fit for your organisation.

Who is Pay Cat?

We specialise in SCHADS payroll and are the only solution with 100% compliant SCHADS Award interpretation, independently reviewed. Our payroll systems are configured to apply the correct classifications, pay rates, penalties, and allowances automatically, reducing reliance on manual checks and adjustments.

For NDIS providers operating under the SCHADS Award, Pay Cat payroll is designed to handle complex conditions such as broken shifts, sleepovers, minimum engagements, overtime, and allowances, helping businesses run payroll with greater confidence and consistency every pay run.