Payroll Compliance is a relatively new term but a glance at the media release page from the Fair Work Ombudsman (FWO) shows how much of a problem there is with accurately paying staff. In a recent media release, the FWO announced that they recovered half a billion dollars in unpaid wages from 2021 to 2022, affecting over 384,000 employees – which is just what has been ‘recovered’. Well over half of this came from large, corporate companies.
The issue of underpayment is far from a new problem – as a result of similar cases in preceding years, a Senate Inquiry was commenced on 13 November 2019. After several years and 130 submissions, the resulting report was finally released in March 2022 and made nineteen recommendations. The first was a recommendation that the Australian Government prioritise amendments to the Fair Work Act 2009 to criminalise wage theft in Australia.
Underpayment is also a broad term – it can stem from any number of areas such as fundamentally flawed payroll calculations, inaccurate accruals of time, incorrect interpretation of rules and clauses, or simply not considering the Better Off Overall criteria.
What are the rules regarding staff payments in Australia?
The FWO enforces strict regulations on staff pay, and companies must maintain compliance with the National Employment Standards (NES) and the Modern Awards for a particular person’s industry and occupation. These include rules and regulations such as paying the minimum wage, accounting for overtime, and including paid leave in their earnings.
In Australia, failing to pay someone for work completed or their proper entitlements constitutes wage theft, which can incur heavy fines among other penalties. Victoria and Queensland recently passed laws that recognise wage theft as a criminal offence.
Wage theft can take many forms and underpayment may not be intentional. It can happen when an employer does not calculate and pay the correct award rates or pays workers ‘under the table’ in cash. It can occur when an employer requests someone to work hours or overtime without adequately compensating them. Or it can be through mistakenly misclassifying workers or through inaccurate calculation of entitlements like allowances and leave.
What are the penalties associated with underpaying staff?
While many of these instances of underpayment may be accidental or unintentional, the result is the same as if they were deliberate: staff receive incorrect compensation for the work they have completed.
Penalties for non-compliance with your employment obligations can be significant, so you must understand these obligations as an employer.
If the FWO discovers that you have underpaid employees, they can take several actions against your business. The penalties can include the following:
- Orders to back pay employees for unpaid wages.
- Significant additional penalties for wage theft against an individual or across a company.
- In Victoria and Queensland, wage theft is already a criminal offence and can result in jail terms of up to ten years for directors and officers of a company.
Payroll Compliance – how does it work?
Tambla’s Payroll Compliance software can calculate payroll results to a high degree of accuracy through sophisticated configuration and provide an offline comparison of your actual pay results against an external and independant model.
Our software receives data from your timesheet records, roster and payroll system to model the results and provide meaningful, visual insights for comparison. These insights enable you to analyse each pay period across each location and highlight particular areas of concern. When a variation is discovered in the payroll compliance software, you can drill down through the layers of data (to individual employee, shift or timesheet) to identify and understand the reason for the variation – allowing you to take corrective action quickly.
Why do you need payroll compliance software?
Now, more than ever, companies and organisations of all sizes are paying increased attention to the underpayment of their staff. They are seeking methods to help highlight issues before they become significant problems, remediate them quickly, and take action to prevent the same issues from reoccurring.
When it comes to payroll compliance, many companies have relied on their payroll software to provide the answers. Like any software system, the output is only as good as the input and the calculations or logic applied to the data. The wrong mix of information is a recipe for disaster.
Unless regular maintenance is applied, external validation sought or third-party auditing completed, the system’s configuration for calculating your pay can fall behind current rules and regulations. Add to this the knowledge drain that can occur with staff movement in your payroll team, and you can easily miss critical manual processes.
Payroll can be one of an organisation’s most heavily regulated and complex processes. The teams looking after the payroll function are often small. They can work under immense pressure, and the systems need (but do not always get) regular investment to maintain them.
Making changes to such a critical set of tools carries considerable risk, and can be seen as challenging. As a result, investment in their maintenance can be delayed and compound problems over time. More companies are looking to complement their existing systems and processes with tools that provide additional layers of governance.
How Tambla’s Payroll Compliance software can help
Australia’s stringent employment obligations mean that you need a solution for interpreting modern awards and enterprise agreements, calculating complex pay rules and clauses and accurately recording the hours worked by employees.
While Payroll Compliance is an emerging technology in its own right, companies like Tambla have provided these capabilities for many years through Award and Agreement Interpretation Engines designed to accommodate Australia’s complex industrial instruments.
Our software can help by providing an automated process that can be integrated with your Governance, Risk and Compliance framework. Our Pay Comparison service can support your payroll operations by providing necessary insights , automating a direct comparison and delivering information in a a way that is easy to understand and drives investigation or corrective action.
Visit our Tambla Pay Comparison page for more on our capabilities.
