Some of Australia’s most well-known brands have recently found themselves dealing with payroll issues – most often inadvertently.
As employers have a legal, moral, and ethical duty to remedy underpayment for employees, it’s critical they rectify all payroll issues as and when they arise. Underpaying employees can harm a brand’s reputation, trust, engagement with employees and the general public and ultimately their financial health. Employers who are not proactively remedying underpayments may also risk hefty penalties from the Fair Work Ombudsman, lawsuits from employees or unions, bad publicity, and talent loss.
Why do payroll issues arise?
Payroll underpayment issues in Australia can arise due to a variety of reasons. The most common reasons identified include the following:
- Systems issues: when time and attendance and / or Payroll Systems are outdated or not configured properly, this can lead to errors in payroll processing. This includes miscalculations, incorrect data entries or misinterpretation of pay agreements.
- Complexity in Awards and Enterprise Agreements: Australia has a highly complex industrial relations environment with Awards and Enterprise Agreements often having intricate and detailed entitlements that are difficult to interpret. Misunderstanding these entitlements, particularly regarding Overtime, Penalty Rates and Allowances is often the source of underpayments.
- Superannuation: Employers must ensure that superannuation contributions, which are part of an employee's statutory entitlements, are accurately calculated. This is based on an employee's regular wages and salary, but generally excludes overtime, bonuses and certain allowances.
- Failure of processes and controls: many employers still rely heavily on manual data entry through spreadsheets for payroll calculations or have some form of manual intervention which is handled outside of payroll systems. This can often lead to unexpected errors arising.
How can external advisers help manage payroll issues?
Bringing in external advisers at the outset, especially when first implementing a new Payroll System, can ensure that set up is done properly, which helps to minimise and hopefully eliminate future problems arising. However, where a payroll underpayment issue has occurred, external support is needed to ensure that backpay, entitlements or amounts owing can be remediated as quickly and efficiently as possible.
The most common advisers to be engaged are Legal Firms and Payroll Specialists. Lawyers play a key role by providing expert advice and interpretation of complex industrial awards or enterprise agreements to ensure the remediation approach meets the obligations of the underlying employment contracts. They also help in the creation of pay rules which will form the basis of remediation calculations and support compliance checks, completing risk assessments and ensuring that all legal obligations are met.
Payroll Specialists often use sophisticated models to recalculate payroll over the relevant exposure period and compare this back to actual payments made to assess payroll liabilities.
However, another consideration is the impact that a long and arduous remediation program can have on the Finance, Payroll and P&C teams of an employer. These teams might be under-resourced to begin with, and sometimes lack the capacity and capability needed to manage a diverse range of remediation activities across multiple streams of work. They also don't have the bandwidth to engage with hundreds – if not thousands – of current and past employees alongside their BAU roles.
Bringing on board a specialised team of Payroll Remediation Program Managers who can seamlessly integrate into an existing Payroll and Finance team can add significant value. Beyond the benefit of an instant injection of highly skilled resources – at both junior and senior levels – investing in the right people upfront can ensure an effective and efficient Remediation Program, which will save time and money in the long run and help to reduce stress for all parties involved.
We’re here to help
With a variety of specialists across Tax, Forensics and Risk Consulting service areas, Grant Thornton can provide help with Payroll Assurance Reviews, Process & Controls Risk Reviews and Payroll Recalculations.
Specifically, our Management Consulting team have experience in Payroll Remediation Program support and have worked with clients across a broad range of industries. Our preferred approach is to fully embed our team, small or large, into the client, working hand-in-hand to design solutions with staff across internal functions with the task of remediation.
The types of services we have found to be the most helpful to our clients as they navigate through the challenges of a remediation program include:
- Remediation program and governance support
- Remediation resource planning
- Project and stakeholder management
- Managing external consulting firms on our client's behalf
- Remediation calculation testing
- Reporting dashboards and insights for executive updates
- Managing payments and communications to current and past employees
- Preparing for interactions with the FWO
- Developing remediation documentation including processes, procedures and playbooks
We have found that an agile and collaborative approach which is focused on providing a personalised client experience has produced the best results. Working closely with the client's team, we also embed change management practices that support them in confidently navigating payroll compliance challenges going forward.
Please reach out to us to discuss your specific Payroll Remediation requirements and we can get started on building greater confidence and trust in your payments systems and processes.
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