|1||Why is it important?|
|3||Common culprits for non-compliance in Australia|
|4||Three pillars of payroll compliance|
|5||How do I get compliant?|
|6||Best Australian compliance solutions|
|7||Get the right advice|
Why is it important?
Next to COVID, staff underpayment has been at the forefront of Australian media, with a long list of recent scandals from major organisations. As of June 2020, legislation was passed to make wage theft a criminal offence in Victoria. This bill is paving the way for the rest of Australia, setting new standards that ensure organisations do more to avoid underpaying their workers.
Research from PwC has revealed that an estimated 13% of the Australian workforce is being underpaid $1.3 billion dollars every year.Source: https://www.pwc.com.au/
Something as simple as an incorrect payroll system configuration could easily breach payment laws. If small issues like this are unnoticed for many years, it can lead to serious liability, fines and/or even imprisonment. With fair pay legislation tightening and public tolerance wearing thin, no industry is safe from the payroll non-compliance crack down.
Before we jump in, let’s start with some basic definitions.
Wage: A fixed regular payment for work or services. Wage and entitlements can depend on age, industry, qualifications, work duties and responsibilities. Australian minimum wage is $740.80 per week for 38 hours. The minimum wage provides a starting point to calculate employee wages, however most employees are covered by an award.
Awards: Industry or occupation based minimum employment standards and wages which apply in addition to the National Employee Standards. Look up the awards relevant to your business on the Fair Work Ombudsman website.
Enterprise Agreements: Conditions of employment for a group of employees at one or more workplaces. You can draft your own enterprise agreement so that it reflects your particular business. If you use an enterprise agreement, it will apply instead of a modern award. The pay rate in an enterprise agreement can’t be less than the pay rate in the relevant modern award.
Source: Australian Government, Fairwork Ombudsman
Common culprits for non-compliance in Australia
Misinterpretation or failure to review
Either employers don’t fully understand which Awards & Industrial Agreements are relevant to their employees or they apply the correct Award & Agreement, but fail to regularly review & update.
Most industrial agreements don’t allow payment of annual salary in lieu of discrete award or enterprise agreement entitlements; often amounts paid are not sufficient to offset what an employee would have been entitled to if paid discrete entitlements.
Incorrect hours or payroll configuration
Employers failing to accurately record hours (including breaks), making it difficult to calculate minimum entitlements or the payroll system is incorrectly configured for overtime, penalties, loadings, allowances & super.
Failure to accurately accrue personal/carer’s leave, particularly for shift or part-time employees.
Three pillars of payroll compliance
1. Meet the National Employment Standard (NES)
Minimum employment entitlement requirements, with a brief description:
- Maximum weekly hours – 38 hours FT + reasonable additional hours
- Flexible working arrangement entitlements – allowed to request after working for the same employer for 1 year
- Parental leave & related requirements – employees whose child was born or adopted is entitled to up to 12 months unpaid leave per employee, plus the right to request an additional unpaid 12 months
- Annual leave – all employees, except casual, receive 4 weeks of annual leave (with some shift workers receive 5)
- Personal/carer’s leave & compassionate leave – 10 days paid leave, two days unpaid carer’s leave as required & two days compassionate leave (unpaid for casuals)
- Community service leave – leave for jury service with 10 paid days & unpaid leave for voluntary emergency activities
- Long service leave – an entitlement for employees after working for the same employer for a long period. The entitlement comes from an applicable pre modernised award
- Public holidays – a paid day off on the relevant state public holiday, employees are entitled to the public holidays of where they are based – not where they are working on the day
- Notice of termination & redundancy pay – up to 5 weeks notice of termination & up to 16 weeks severance pay on redundancy, calculated based on length of service
- Provision of Fair Work Information Statement – must be provided to all new employees, containing information about the NES, flexibility requests & arrangements, modern awards, agreements, freedom of association, workplace rights, termination of employment, rights of entry & the role of the Fair Work Commission & the Fair Work Ombudsman
For more specifics, see our source: Australian Government, Fairwork Ombudsman
2. Keep a track record & provide pay slips
All businesses, large or small are obligated to maintain records of compliance and provide pay slips. This ensures that your organisation can prove that employees receive correct wages and entitlements. Employers need to ensure that time and wages records are:
- Kept for up to 7 years
- Readily available
- Legible & in english
What information needs to be kept?
- General employer & employee records
- Pay information
- Hours of work
- Super contributions
- Individual flexibility arrangement
- Guarantee of annual earning
- Ending employment
- Transfer of business
Employers must provide employees with their pay slip within one working day of payment. More information about payslip requirements can be found on the Fair Work Ombudsman site.
3. Effective management of relevant modern awards
Based on industry or occupation. Relevant modern awards generally have conditions relating to:
- Minimum wages
- Wage or salary annual arrangements
- Employment types (full-time, part-time or casual)
- Work arrangements (rostering or variations to hours)
- Overtime & penalty rates
- Leave, leave loading & taking leave arrangements
- Consultation, representation & dispute settlement procedures
Organisations are responsible for keeping up-to-date with relevant modern awards. Maintaining compliance can be a key challenge for payroll considering the rules are often changing and can be complex to understand.
How do I get compliant?
A payroll system, wage and award review or regulatory technology can give you confidence that your organisation is operating as it should. Considering the complexity of the Australian wage and award landscape, a compliance check is an ongoing project to be conducted at least once a month.
To manage a payroll compliance review internally, you will need to fully understand and interpret all relevant industrial agreements, wage and engagement methods, seeking legal advice where appropriate. This is fine if you have the time and expertise, but realistically most organisations will need to consult a specialist in this area to reduce risks.
Traditionally, the only choices available were to engage an expensive third party auditor or hire a consultant to audit your payments, processes and payroll tech. A notoriously invasive and expensive exercise. Luckily, lots of payroll ‘regulatory technology’ software has emerged in the Australian market as an alternative. Approved payroll software provides an affordable safe harbour for organisations to improve confidence that their workers are being paid correctly.
Best Australian compliance solutions
Here are the top vendors for easy and affordable payroll compliance:
- Paytools Australia is brought to you by Navigo, the well-established HR and payroll technology consultancy. Pioneering a better approach to payroll compliance, the Paytools team are passionate about improving payroll people’s day-to-day. Solutions include:
- PayRec is a secure solution that simplifies and organises payroll reconciliation, allowing payroll to streamline the process and to easily flag discrepancies
- WageCheck helps Australian organisations independently detect internal wage issues. It works by comparing employee, payroll and wage history reports against our library of award and industrial agreement rules, providing a detailed report of issues and recommendations
- RosterRight is an Australian based company that offers consulting services and smart technology to ensure that companies are meeting the legal requirements of rostering. Their team of consultants can also work with you to identify where improvements can be made.
- Australian Payroll Association (APA) has been working with payroll teams throughout Australia to design best payroll practices. This entity now offers extensive training and advice to organisations to help to get things right in the payroll industry.
- The Association for Payroll Specialists (TAPS) is a member-based community that has been operating in Australasia for 30 years. TAPS specialises in advice, training, recruitment and payroll health checks.
- Outflank Paytracker is simple to use and allows employees to accurately track their own work hours and accurately calculate their entitled pay.
Don’t forget to download our free payroll compliance checklist [PDF] as a quick reference guide you can keep!
Get the right advice
Looking to improve payroll compliance within your organisation? Get in touch, our Melbourne-based team will work with you to help you identify which payroll solution is right for you.
About the author
Lee, Paytool’s Marketing Manager, is passionate about all things HR tech. She is actively exploring the most effective ways for Australian organisations to solve payroll compliance issues.