"We've always done it that way is a bad reason to do anything," says PwC partner and payroll consulting national lead Rohan Geddes.
Over the course of the last year, several high-profile cases of underpayment of staff from companies like NAB, Westpac, Bunnings, and Woolworths have been headline news.
Underpayment can cause not only financial stress but also reputational damage. Geddes says that savvy companies should look at the examples that have come before regulators to self-reflect and look for similar problems in their own systems.
Here are some things to consider.
Signs you might have a payroll problem
Geddes says that a systemic review of your system isn't necessarily a bad idea however it doesn't need to be your first action. Listening to complaints from your employees - that the total is off, or tax seems high, or that super contributions don't seem right - are a good way to start targeting problem areas.
"The environment has shifted; there used to be an expectation that your pay was right and you could let it go," he says. "Now, there's increased attention to payroll because it has become very complex.
"If employees are saying that something isn't right, take those comments and start your review there to see if there are systematic issues behind it."
The way the workforce is changing, including more casual employment, gig workers, flexible arrangements, are making things more complex. That inherently increases risks.
"Payroll is the biggest expense for organisations, yet it's viewed as a back-office role with few resources and control," says Geddes. "That is changing."
Non-compliance is serious (but isn't always malicious)
There are plenty of reasons that improper compensation issues occur and, generally, they aren't because the big bad company is trying to steal from their staff. "The simple fact is that payroll is complex," says Geddes. "Small issues over time can become a very big number.”
On any payroll system, there are four key areas where problems can arise: people, process, technology, governance & controls. No single area is always going to be the culprit. And, often, it's a mix of issues.
"We worked with one organization that paid employees Saturday penalty rates and overtime" says Geddes. "A payroll person in the past made the decision to use the overtime code for both rates, since the monetary amount was the same. However, overtime doesn’t attract superannuation and Saturday penalty rates do - so they ended up with a significant underpayment issue.
"The process was set up by one person, who trained their replacement on the steps to do it so it became institutionalized. It wasn't an intentional underpayment however, over time, it added up."
What can you do to remedy your problems?
Over the last six months, Geddes says there has been a shift in how organisations view payroll and the risk associated with it. "They're focusing on getting resources and training, proper technology, and ensuring proper controls are in place like regular reviews of pay codes."
Data visualization tools, too, can help both companies and regulators ensure everything is as accurate as possible.
Once an issue is identified, Geddes says that businesses should seek legal counsel to lay out the next steps. And then, once they have determined cause and extent of the problem, engage with the regulators. "Australia's regulatory system is complex, and there is often blame placed on it when there are problems, but regulators have the same focus as employers – ensuring their employees are paid accurately.
Learn more about the ways your organisation can limit its risk around payroll systems and remuneration from this blog Geddes wrote with Bryony Binns, PwC Australia's legal partner and data assurance partner Stuart Shinfield.