A court has ruled that the Better-Off-Overall-Test (BOOT) is required for each salaried employee’s every pay run, without the ability to offset one pay run against another.

The employees affected will require pay adjustments to any payrun where the employee’s pay is less than they would earn if on the award for the times worked  

“The decision, handed down by Justice Michael Perram on 5 September 2025, found that Woolworths and Coles could not use broad annualised salary arrangements to offset underpayments in one pay period against overpayments in another. Employers must instead meet every award entitlement – including overtime, penalty rates and allowances – within each individual pay period.” Clyd & Co Industrial Lawyers

• Employers relying on set-off clauses to offset any underpayments in one pay period against overaward payments in another pay period may be exposed to an underpayment claim. 
• Paying an all-inclusive salary does not excuse employers from keeping pay and overtime records in accordance with the regulations. Employers cannot merely rely on employees to create their own overtime records using clocking data. 
• Employers should not rely on policies and procedures to evidence agreement by an employee to forgo an entitlement under an award. 

• Employers must also be able to show that employees: 

  • were aware of the entitlement; and 
  • agreed to forgo it. 

  • To satisfy the evidential burden on employers in this regard, employers should have written evidence of the agreement with the employee. 

The Ongoing Potential Consequences of the Coles Ruling 

This will require the business to test their salaried employees’ pay against what they would have received if paid on the award and make restitution for the underpayment each payrun

Offsetting of overpayment in one pay period to another will not be permitted.  

https://inzenius.com/2026/08/01/better-off-overall-test-bootimpact-on-payroll-compliance/

Test your compliance today and plan to automate the process in the future

To test your compliance, take the following steps

1. Use a currently available sample salary staff BOOT tester, such as is available at: www.inzenius.com
2.   If the pay was less than the award for the times worked, undertake a deeper forensic dive to identify the prevalence 

A tool was published late last month with over 400 tests of timesheets that have been created for businesses to put their mind at rest about their compliance, or not.

I had been struggling with a back pay project for ~12 months. The Inzenius team responded to my query and provided the requested data within a day – exceptional service and great software that will assist a lot of businesses! ” Bianca Toce, People & Culture Advisor, Save Group.Great software that will assist a lot of businesses! Bianca Toce, People & Culture Advisor, Save Group.

Businesses have been able to validate whether they would pass or not the BOOT test for a sample of their selected salaried employees.

Payroll system will also help to facilitate ongoing per pay run compliance and remediation

“ Here we are now with not only a better overall system that delivers up to a 70% reduction in data duplication and entry across a number of systems in payroll processing time and effort, but we have also achieved additional improved functionality overall.” Grant Summers CFO, Incognitus

A sample of a testing tool for salaried BOOT compliance is available on the Inzenius Web landing page at www.inzenius.com

 

Ongoing BOOT Compliance 

Payroll system will also need to help facilitate ongoing per-pay-run compliance and remediation.

“ Here we are now with not only a better overall system that delivers up to a 70% reduction in data duplication and entry across a number of systems in payroll processing time and effort, but we have also achieved additional improved functionality overall.” Grant Summers CFO, Incognitus – Inzenius Customer

Frequently Asked Questions

Is the BOOT test a current requirement?

Yes, it was passed in 2025

Does this mean we will need to maintain timesheet records for all salaried employees?

Yes, for those earning less than $191,100 (2026 year) adjust each year by the CPI wage increase index 

Does this court ruling mean it is the law for all businesses?

The legislation is in place, and the ruling sets the precedent for future cases.

What is the simplest way to process the payments? 

Run your salary pay normally, then instigate a BOOT test against what was paid, and then process the payments as a separate pay adjustment for the employees shown to be underpaid. This will be good evidence of the remedial process you undertook if challenged in the future. 

Who will initiate the underpayment investigation? 

The investigation of underpayment can be undertaken by an employee, as was the case with the Cles actions or by any approved agency or union on behalf of the employee, or as part of a company investigation of underpayments. 

Investigation Process & Scope

• Triggers: Employee complaints, anonymous tips, or proactive audits by regulators like the Fair Work Ombudsman.

• Review period: Investigators assess pay slips, employment contracts, timesheets, and bank records.

• Distinction: Accidental errors require back-pay and civil rectification, whereas deliberate short-changing moves to criminal investigation.