Pay is good. Payroll, on the other hand, is ignored – until there’s a mistake. So just how well are Australian employers tracking in terms of meeting obligations to their employees, such as paying them accurately and on time?
Employee time tracking and scheduling app TSheets examined annual enforcement data published by the Fair Work Ombudsman and found that three out of four of the most serious violations are for payroll or record-keeping offences. Judging by the number of cases, the most frequent violations occurred in the retail sector, followed closely by business services and then in hospitality.
The average court fine for Fair Work violations over the past two years has been $68,000. In 2014-15, the total amount recovered from employers and business owners through legal action was $1,119,551.50 and the average bill for each employer/business owner was nearly $40,000.
“It’s interesting to see how many businesses that were taken to court now have an insolvency record on the ASIC website. They account for just over half of the total in 2014-15 and 39 per cent of the total in 2015-16. In other words, although it’s rare for the ombudsman to take a business to court, when it does, there’s a good chance it will go under,” says Simon Worsfold at TSheet.
Given that the majority of offences related to payroll it’s timely that PwC have just released a report that focuses on the topic. Acknowledging how unappealing the topic is for businesses, the report says “It is an area that seems to be governed by the mantra: ‘Payroll. No news is good news’.” In other words, senior management consider it a low-risk function and as long as things are running smoothly, they aren’t concerned with it.
Yet underinvesting in regular training and support for the function, and being overly reliant on the (often undocumented) knowledge of a few key people who are too dispersed among departments, opens organisations to liability.
More than that, PwC believes that companies aren’t using the opportunities that payroll data offers as a way of better understanding their employees. “We believe that organisations which view payroll as a low cost compliance function are limiting their ability to leverage the valuable employee data and insight that sits within the function. Worse, the lack of a continuous improvement mindset can find an organisation exposed to increased compliance costs, employee dissatisfaction and fraud risk.”
(For 5 tips on how HR can leverage digital transformation, read our guide).
Payroll in the technology age: An HR checklist
PwC poses some useful questions HR needs to ask of itself and the business
- Does your current payroll system fit into your overall technology strategy?
- If your HR system is cloud based, what interface do you have to your system and how do the outputs link to your finance system?
- Do you know the total cost of salary and wages paid to employees in the last 12 months?
- Have you analysed the cost of running your global payroll systems and number of vendors?
- Do you have confidence that your outsource provider can deliver an end to end payroll solution?
- Are you confident that you have not over or under paid employees in the last 12 months?
- Is your payroll data secure and have you performed penetration testing or tested ISO compliance with ISO 27001 (whether you operate the payroll internally or via an outsource provider)?
- How can you take advantage of cloud technology to enable a more resilient and efficient payroll environment?
- Have you assessed whether the payroll knowledge and skills of your payroll team are up to date, particularly if you have recently changed technology or been through a merger/acquisition transaction?