Preventing underpayments requires more than a functional payroll system – it’s about joining the dots between people, payroll and processes.
Conversations about payroll compliance are no longer confined to an organisation’s back offices – they are now front-and-centre in executive and board discussions, employee forums and media headlines.
With rising scrutiny around underpayments – and the growing legal consequences of getting it wrong – ensuring employees are paid correctly and fairly requires attention at every level of the organisation.
“It’s about moving beyond payroll fixes and embedding a proactive and cross-functional approach to employee pay,” says Susan Sadler CPHR, Founder and CEO of Red Wagon Workplace Solutions.
“HR plays a key role as a change agent in breaking down those silos.”
The three ‘P’s of accurate pay practices
Payroll compliance isn’t the responsibility of any one person or department – it’s a shared commitment that requires coordination between people, payroll and processes, says Sadler.
Each element plays a vital role, and overlooking just one can lead to costly errors or legal risk.
1. People
When it comes to payroll compliance, people can make or break the process. HR, operations teams and middle managers all play a role in shaping how pay practices are understood, implemented and communicated.
Many managers already navigate compliance discussions in safety or performance contexts, and the same skills apply here, says Sadler – but they need the right support from HR.
“Helping them be well-prepared for those conversations – [by providing] talking points, FAQs, or details about how to escalate queries – is really important,” says Sadler. “That way, you’re empowering them, not just giving them responsibility and then blaming them [if things go wrong].”
Managers should be equipped to work with employees to ensure they are reporting their hours and pay correctly, she adds.
2. Payroll systems
While some employers are quick to blame system failures for underpayments, payroll systems are only as good as the inputs they receive, says Sadler.
“These processes are put in place by people,” she says “A lot of [errors] come from workforce planning decisions. So how roles are structured, how we classify them and how we roster them – because the devil is in those sorts of details,” she says.
“It’s about moving beyond payroll fixes by embedding a proactive and cross-functional approach to employee pay.” – Susan Sadler CPHR, Founder and CEO, Red Wagon Workplace Solutions
This means the payroll system is the last link in the chain, she says. If the data coming in is flawed, the output will be too.
As a result, the solution doesn’t just come down to technology infrastructure and IT teams, but rather cross-functional alignment on how data is gathered and used in the first place. For example, HR and IT might partner on building a single source of truth for employee data, ensuring role changes flow seamlessly into the payroll system in real time.
3. Processes
Ensuring payroll processes are airtight requires real-time visibility, says Sadler. Without regular reviews and check-ins, a small classification error can compound into a significant underpayment.
However, in light of the recent criminalisation of wage theft, pay compliance has become an even more fraught and sensitive issue than it was before.
To help reduce this anxiety and reframe how payroll compliance is viewed, Sadler advises thinking of the process like we do workplace health and safety – it’s not optional, and it’s not someone else’s job.
“You’ve got an obligation to keep your people safe, and you’ve got an obligation to pay them properly,” she says. “It becomes less threatening when it’s not about the threat of jail but just a basic expectation.”
This reframing helps shift the conversation from panic and blame to one of shared responsibility, and helps to reduce any stigma that might be attached to employees speaking up when something is amiss.
HR as a strategic connector
Ensuring a cohesive approach to the three elements mentioned above is paramount to preventing underpayments.
When things go wrong, it’s easy to point fingers – at the system, at leadership, at finance teams. But that doesn’t solve the core issue, says Sadler. To avoid a blame culture taking hold, HR is in an ideal position to bring all the relevant teams and functions together to tackle the issue.
“It’s not necessarily that we’ve got to uncover the fixes or do the classifications – although we can certainly play a role in that,” she says. “It is an opportunity to bring together the people, systems and processes to get everyone on the same page.”
That means pulling in functions like finance, legal, IT, operations and the board and/or executive team.
“It’s creating a shared understanding of the risks and responsibilities,” she says.
This cross-functional collaboration will provide visibility over any weak links in the chain that could lead to payroll errors. HR can then translate these insights into clear, consistent communications.
For example, if a pay rate changes, managers need to know about it, so they can field any questions from their teams. Or, if the payroll system is updated, finance should understand what that means for budgeting.
“A lot of organisations just roll out those changes at that payroll level and don’t bother talking to the manager about what it means for them on the ground,” says Sadler.
When HR joins the dots between people, platforms and processes, the result is not just fewer payroll errors or faster fixes, she says – it’s an organisation where pay compliance is not seen as a reactive measure, but a core part of how it builds trust, promotes fairness and ensures long-term stability.
All information, content and materials available on this site are for general informational purposes only. The contents of this article do not constitute legal advice and should not be relied upon as such.
Hear more from Susan Sadler CPHR and other experts at AHRI’s webinar on 30 April exploring the role of HR in preventing underpayments. Register now.
