In May this year, the Australian Red Cross became the latest in a very long list of businesses to face payroll and remuneration compliance issues. As reported in The Guardian at the time, mistakes had been made in paying their staff; resulting in 800 current staff being owed an average of around $1,800 per annum over several years.
While the Australian Red Cross started to take urgent steps to fix this and pay due entitlements to their employees, the charity also needed to calculate what the mistakes meant for past employees. This was no small task, requiring a detailed analysis of old databases, paper files and individual employee records.
Payroll and remuneration compliance challenges all businesses
Of course, payroll is an organisation’s biggest expense; it also carries inherent risk. The Australian Red Cross is by no means alone in facing payroll and remuneration compliance challenges. Even a cursory glance at the media releases on the Fair Work website from June alone will demonstrate:
- More than $100k in penalties after a Brisbane massage parlour refuses to back-pay two workers $12,842
- A Melbourne dental practice faces second legal action after allegedly underpaying another 457 visa holder
- Migrant workers allegedly paid no wages for a year’s work under the guise of a ‘work experience’ scheme
PwC estimates Australia’s top employers make payroll errors exceeding $4.4 million every year.
One of the most complex payroll environments in the world
In fact, it’s a problem that is Australia–wide. It’s certainly what the Fair Work Ombudsman’s recent proactive compliance and education campaigns around the mid-north coast and mid-western regions of NSW reveal.
In the mid-north coast region, approximately 31% of businesses were not paying their employees correctly, with 25% not complying with record-keeping and payslip requirements.
It was similar in the mid-western region, with 34% of businesses not paying their employees correctly; whilst 23% of businesses were not complying with record-keeping and payslip requirements.
Part of the reason for this is that awards and enterprise agreements can be complex, and interpretations tend to be open to interpretation! So, you need to ensure that your Payroll team is kept abreast of proposed changes, and is given enough lead time to plan for, and test, changes within the payroll system.
Payroll is not just about paying your staff
Navigating your legislative obligations as a HR or Payroll Manager extends far beyond payroll laws.
You’re expected to understand the complexities surrounding taxation of various awards and enterprise agreements, different leave entitlements, loadings, and payroll tax in different states. Plus, there’s the ever-changing superannuation regime. You actually need a depth and breadth of knowledge across:
Fair Work Commission and Fair Work Ombudsman
- Decisions on penalty rates
- Updates to modern awards
- National Employment Standards
- Unfair dismissal
- Better Off Overall Test applications
Enterprise agreements and modern awards
- Classification of employees
- Wages, hours, overtime, penalties and allowances
- Leave entitlements
Australian Taxation Office
- PAYG withholding
- Single Touch Payroll
- Employee share plans
- Choice of funds and default funds
- SuperStream reporting
- APRA & ASIC
- Clearing houses
- Statutory limits
- Payments to injured workers
- Return to work
But, that’s not all. There are court orders and garnishee orders for wages to deal with. You need to be across the Privacy Act and understand how to treat personal information, whilst ensuring secure access and storage. You need to understand visa obligations, and the right to work check if you’re hiring people from overseas. Additionally, you need to provide company reporting information, and pay payroll tax to the Office of State Revenue.
And, over the next 3-5 years, you’re going to need even more skills as reporting requirements are set to increase.
With so many checkpoints, it is understandable that a lack of knowledge in any of these areas can quickly result in payroll and remuneration compliance fails in the form of over- or under-payments to staff. And with them, the potential for reputational damage.
Technology can help
For businesses, a remedy for the payroll and remuneration compliance challenge could be as simple as using new software.
Your payroll technology needs to help you:
- Address all legislative requirements
- Implement enterprise agreements, awards and contractual obligations accurately
- Produce payroll reporting in accordance with Single Touch Payroll requirements, quickly and easily
If your business is using technology that isn’t quite right for your needs, and you’re having to make significant workarounds, then you’re setting yourself up for compliance fails.
Likewise, without the right technology backbone, you may find yourself overly reliant on a few key people, rather than having fully-automated and compliant processes. Should those people leave your organisation, they’ll take their knowledge with them, potentially leaving you scrambling for information, and wide open to payroll and remuneration compliance risk.
Fortunately, with modern payroll technology solutions, such as Flare, you can overcome many of the complexities in managing payroll compliance matters. These include:
- Time collection and recordkeeping
- Award interpretation
- Leave liability
- Calculation of superannuation contributions, and taxation.
Technology, combined with the power of data analytics, presents you with the opportunity to take a critical look at your payroll function, whilst identifying where you can make potential improvements to increase efficiencies, and reduce costs.
As we discussed in an earlier post, once you fully integrate payroll with your core HR processes, such as onboarding, performance management, benefits administration, and time and attendance management, then payroll becomes strategic.
Want to see what a fully-integrated Payroll and HR solution could do for your company? Simply book a free demo of FlarePay, our powerful, yet easy-to-use Payroll software. You can use FlarePay to take care of payslip distribution, general ledger interface, superannuation, banking file lodgements, Single Touch Payroll compliance and more.
Get started! Book your free demo today.