Wage underpayments continue to be in the spotlight, following accusations of ‘wage theft’ against some of Australia’s biggest employers like Wesfarmers, Coles and Woolworths.
Not-for-profit (NFP) organisations have been under the microscope too, with allegations levelled at the Australian Broadcasting Corporation, The National Library of Australia, and even government departments. Whilst underpayments may not be deliberate, NFP’s need to be on the front foot to manage the potential damage a rectification may have. A rectification could potentially impact an organisation’s financial position, reputation, the assembled work force and various other stakeholders. But these risks can be addressed through regularly reviewing and optimising payroll compliance processes.
Complexity in a diverse sector
Under the Fair Work Act, employers must take all reasonable steps to comply with their obligations, which may include steps such as undertaking payroll compliance reviews. Heavy fines and penalties are among the consequences, not to mention serious reputation risk to directors and the company. If a corporate employer is found to have deliberately breached the Fair Work Act, a manager can also be held personally liable.
There are a number of factors that could lead to under payments:
- Incorrectly applying awards
- Failing to properly classify employees (contractors/casual/volunteer)
- Payroll errors from incorrectly applied rules within existing HR systems
- Payroll and HR staff failing to communicate changes to rates or agreements
- Inaccurate records on timesheets or leave calendars
- Confusion over salaries and inclusions
- Errors in superannuation payments.
NFP’s can be especially vulnerable to payroll errors, as there are a variety of awards that could apply to the variety of roles and/or industries that relate to the organisation. In some cases, organisations may have to apply multiple awards. This complexity can result in many employers unknowingly underpaying their workers.
The level of complexity is beyond the capability of some digital payroll systems. Even through a legal lens, many awards are open to interpretation. Most organisations that get it wrong do so unintentionally and make every effort to remediate outstanding entitlements, but nonetheless may find themselves having to manage expensive repayments or reputational damage.
What can organisations do?
Some NFP leaders may take an ‘ignorance is bliss’ approach to managing compliance or place faith in the concept that the organisation is doing its best, for fear of discovering payroll errors that need a costly remediation. However, if an organisation is proactive, they can take steps and set themselves up for consistent compliance in the long term. This can help avoid penalties, reputational damage or financial impact to the organisation or its directors.
For NFPs looking to assess payroll compliance, there are a number of steps that can be taken to lay the groundwork
- Review payroll outputs at least annually with the assistance of experts
- Review any current entitlements, and assess your payroll system
- Train staff in payroll compliance and encourage good communication between HR and payroll
- Keep a close eye on salaries, accrued leave, allowances and superannuation
- Make it easy for staff to alert you to suspected underpayments
- Keep good employee records.
What to do next
If you or your organisation have questions around payroll compliance, the experts in our Digital and Data Solutions team are always happy to help. Reach out to Pitcher Partners Melbourne today.
