How to Prepare your HR Records Before a SCHADS Audit
When preparing for a SCHADS audit, many businesses focus on payroll first. In reality, audits begin with HR.
Before payroll data is reviewed, auditors assess whether your HR records support the payroll outcomes being produced. If HR data is incomplete or incorrect, payroll results will be incorrect, even if the payroll system itself is functioning as intended.
This guide focuses on the HR foundations that underpin SCHADS compliance. It explains what auditors look for in HR records, how onboarding and contracts affect payroll outcomes, and how to prepare your HR documentation before an audit occurs.
This article is Part 1 of the SCHADS Audit Readiness series. Part 2 covers payroll evidence, reporting, and award interpretation.
Payroll does not make decisions on its own. It calculates pay based on the information provided through HR.
Employment type, classification, pay point, agreed hours, and allowance eligibility are all determined during onboarding and contract setup. Payroll then applies SCHADS Award rules to that data.
Auditors start by verifying whether HR records support payroll outcomes. If the base HR data is incorrect, payroll outcomes will be incorrect as well, regardless of automation or system accuracy.
This is especially important under the SCHADS Award, which includes complex rules around classifications, minimum engagements, broken shifts, allowances, and entitlements. Correct onboarding is essential for these rules to apply correctly from the first shift.
Payroll accuracy is created before payroll runs.
SCHADS compliance follows a sequence:
- HR setup, including role definitions and classification templates
- Employee onboarding and data collection
- Employment contracts confirming award coverage and conditions
- Classification mapping to SCHADS award rules
- Payroll applying those rules to calculate pay and entitlements
Each step depends on the accuracy of the step before it. If one part of the chain is incorrect, every step after it is affected. This is how systemic underpayments occur.
During a SCHADS audit, auditors request HR records before payroll reports.
The following documents are typically reviewed early in the audit process.
Signed Employment Contracts
The employment contract is usually the first document requested.
Auditors review contracts to confirm:
- Employment type
- SCHADS Award coverage
- Classification stream, level, and pay point
- Ordinary hours of work
- Allowances and conditions
Missing, outdated, or incomplete contracts are an immediate audit risk.
SCHADS Classification and Pay Point Documentation
Auditors check whether the duties performed align with the assigned SCHADS classification.
The SCHADS Award contains four streams and multiple classification levels, each with defined duties, responsibilities, and progression rules. Classification must reflect:
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Duties performed
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Qualifications held
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Experience and responsibility level
This information must be documented consistently across contracts and HR records.
Employment Type Validation
SCHADS rules differ significantly depending on whether an employee is casual, part-time, or full-time.
Auditors assess whether employment type aligns with:
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Contract terms
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Roster patterns
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Allowance eligibility
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Leave entitlements
Common issues include casuals rostered like part-time employees, part-time employees without agreed hours documented, and incomplete conversion records.
Right to Work Evidence (VEVO)
Auditors expect evidence that each employee has the legal right to work in Australia.
This includes documentation verifying citizenship or visa status, along with any work restrictions. VEVO checks should be completed during onboarding and retained as part of the employee record.
Qualifications and Mandatory Checks
SCHADS roles often require mandatory certifications, such as:
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First Aid
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NDIS Worker Screening
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Working With Children checks
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Driver’s licence
Each qualification should be recorded with issue dates, expiry dates, and verification evidence. Auditors will also check whether certifications are monitored and kept current.
Position Descriptions
Position descriptions are used to justify SCHADS classifications.
Auditors compare position descriptions against actual duties to confirm that the assigned level is appropriate. Position descriptions should clearly outline:
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Classification and stream
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Role scope and responsibilities
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Skill and knowledge requirements
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Working conditions and supervision
They are particularly important when supporting classification upgrades or pay point changes.
Fair Work Information Statement
The Fair Work Information Statement must be provided to all employees during onboarding.
Auditors check whether this requirement has been met and whether distribution can be evidenced.
Casual Employment Information Statement
For casual employees, auditors also check whether the Casual Employment Information Statement was provided at onboarding.
This document explains casual definitions, conversion pathways, and employer obligations.
Contract Compliance and SCHADS Classifications
Incorrect classification is one of the most common causes of SCHADS underpayments and audit findings.
A compliant SCHADS employment contract should clearly state:
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The SCHADS Award
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The applicable stream
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Classification level
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Pay point
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Employment type
Contracts that are missing or inconsistent in any of these areas create long-term payroll risk.
Understanding SCHADS Streams, Levels, and Pay Points
The SCHADS Award includes four streams:
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Home Care
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Crisis Accommodation
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Social and Community Services
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Family Day Care
Within each stream are multiple classification levels, each with defined duties, autonomy, and qualification requirements. Most streams also include multiple pay points that determine progression over time.
Classification is not just a job title. It determines:
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Base pay rates
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Penalties and allowances
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Shift rules and minimum engagements
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Progression and entitlement conditions
Accurate classification requires assessing duties performed, responsibility level, qualifications, and experience.
Reviewing Classifications and Pay Point Progression
To support ongoing compliance, classifications and pay points should be reviewed regularly.
This includes:
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Confirming employees are classified under the correct stream, level, and pay point
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Reviewing progression rules and documenting movement between pay points
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Keeping records of performance reviews and progression decisions
Misclassification results in underpayment, regardless of payroll automation.
If you’re using Employment Hero HR alongside Pay Cat Payroll, the integration helps keep key employee data consistent across both systems. This matters for audit preparation because auditors look for alignment between HR records and payroll outcomes.
With Employment Hero HR, you can centralise core HR documentation within the employee record, including:
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Employment contracts and contract audit trail
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SCHADS classification details and employment type
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Right to work evidence (VEVO checks)
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Qualifications and expiry tracking
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Position descriptions and policy acknowledgements
Because Employment Hero HR and Pay Cat payroll sync, changes to employee details in HR can flow through to payroll, reducing the risk of mismatched records, duplicated data entry, or classification updates being missed.
That said, even if you don’t use Employment Hero HR, the preparation steps in this guide remain the same. The key is having HR documentation that is complete, current, and easy to produce, with contracts, classifications, and compliance records clearly supporting payroll outcomes under the SCHADS Award.
If you're already using Pay Cat and want to see how Employment Hero HR and Pay Cat work together, fill in this form and the Employment Hero team will get in touch with more info.
Preparing HR records for a SCHADS audit involves reviewing multiple documents and verification steps.
Some providers manage this manually. Others prefer to work from a structured checklist to ensure nothing is missed.
To support this process, you can download the SCHADS HR Audit Preparation Checklist, which brings together the key HR records commonly reviewed during an audit.
This checklist can help confirm that required contracts, classifications, right-to-work checks, qualifications, and supporting documentation are complete and up to date before information is provided to an auditor.
Continue to Part 2: SCHADS Payroll Audit Preparation
Part 2 of the SCHADS Audit Readiness series covers the payroll side of audit preparation, including payroll reports, reconciliations, award interpretation, and supporting evidence.
Both HR and payroll preparation are essential for audit readiness. Reviewing them together helps ensure payroll outcomes align with the underlying HR data that supports them.
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.