7-Eleven, Michael Hill Jewellers, Woolworths, Bunnings, ABC, Rockpool Dining Group, George Calombaris – are all names which have hit the headlines in the past for underpayment of wages to staff. Many are transparent with the public when they have identified the issue and have self reported their errors. But too many businesses do not know that they are doing the wrong thing – and waiting until it hits the news headlines is not a good approach to take.
Why do businesses fail to comply with payroll obligations?
Whilst the above mentioned organisations had shortfalls in the millions, even in smaller businesses, underpayment of $1 an hour can add up quickly! The reasons commonly given for underpayment and errors are varied. Complex industry awards, outdated payroll technology platforms, set and forget approaches, under skilled payroll teams, and manual errors when attempting to integrate timesheeting with payroll processing. However, none of these excuses are good enough.
Compliance with payroll is ultimately the responsibility of the organisation’s executive and board. If it isn’t on the boards’ radar – then it may only be a matter of time until penalties against directors are enforced. The Fair Work Ombudsmen have criticised the oversight of boards over the years, and given the regularity of underpayment of staff, their criticism may well be justified.
What should you do to ensure payroll compliance?
So how do you fulfil your obligations as a board member, so you have the assurances you need and that payroll obligations are being met? One effective and efficient tool that we at Dexterous have been working on with boards are performing external payroll compliance reviews. Having an external expert review tax calculations, award interpretations of overtime and penalty rates, timesheet processing, internal controls can provide boards with that peace of mind. Some clients gain comfort in engaging us to do these reviews as a once off, and others complete these annually – especially those that have turnover within their internal payroll team.
Other strategies to avoiding making the headlines for underpayment of staff, is to ensure that your payroll staff are adequately trained and encouraged to keep up to date with the changing legislation around payroll. Your CFO should be looking at the continuous training needs of the payroll team, providing feedback on the internal controls in place and advising the board of limitations of system integrations or technology involved.
Sadly, it has been uncovered many times in the media that underpayment of staff is an actual business strategy! Turning a blind eye, or being complacent as a board member and ignoring this risk of underpayment of staff, is becoming increasingly penalised by the Australian Government and FWO.