How to avoid Wage Theft and Payroll Woes

Payroll Woes, Wages Theft and other Dubious Dilemmas

If Qantas, Caltex, Bunnings and Wesfarmers all got it wrong … how can you make sure you get it right.

There has been an abundance of media coverage recently surrounding underpayments to staff, payroll inaccuracies and superannuation errors.

Leading the dialogue is the term wages theft’ and the impression of the ‘fat cat boss’ stealing from the ‘lowly workers’.

  • But how real is this?
  • What is actually occurring within payroll to get errors to such a scale?
  • What is the likelihood of criminalisation?

In one of the most publicised cases in the past year, George Calombaris’ MAdE group discovered $7.8 million dollars’ worth of underpayments to staff and now has his company financially in shreds, administrators appointed and himself in a PR disaster.

If big businesses with integrated payroll systems and large teams of Payroll and Human Resources personnel are getting it wrong, how can it be expected that small to medium businesses (often with just a part-time bookkeeper doing the pays) get it right?

Be it simple steps you can implement to test your payroll, better understanding of payroll calculations or considering the impact of Award penalties, allowances and casual loading have on your payroll, help is at hand. 

  1. Know your Award
  • There are 155 Modern Awards and whilst most are Industry based awards, not all positions within your business will be listed. In some instances business are covered by more than one award.
  • Award clauses can differ slightly between some Awards, and majorly between others. Read your award thoroughly and understand what applied to you.
  • Make sure you understand the clauses covering hours of work, when overtime is payable and allowances and penalties
  • Check whether there is flexibility in your award to create an annual salary and scoop allowances and penalties into a package rate, as there are often conditions around this.
  1. Two wrongs – in the eyes of the Fair Work Act and Award system – do not make a right.

Paying a bit extra here and not getting it right somewhere else does not:

  • exempt you from blame
  • cancel each other out,
  • get you off the hook from an investigation by Fair Work

Just because you pay over the Award DOES NOT exclude you from the provisions of the Award. In many instances, unless it is clearly outlined/documented and complies with the flexibility provisions of the Award, the extra becomes irrelevant, and you just have to correct the shortfall.

  1. Paying the correct Superannuation

There are various amounts of set up required in your payroll system.  Much of this is to how and when leave is calculated and for superannuation what pay components are classed as ordinary times earnings (OTE) for Superannuation calculations.

So how does your system cope with salary sacrifice arrangements into superannuation, what about when a salary package incorporates a payment for regular overtime, what about bonuses.  A box ticked (or not ticked) in the set up of your payroll could result in shortfalls or payments being made when they are not required. 

  1. Getting leave accruals correct

Like Superannuation it is essential that your payroll set up calculates leave correctly.  This is essential for ensuring that annual and personal leave is not calculated for casuals but Long Service Leave is.  The pro-rata calculation of leave accruals for part-timers has also changed.  Staying on top of these legislative changes and ensuring your system is updated accordingly is essential for payroll effectiveness.

  1. Understanding termination pay

Termination pay is a sensitive issue for departing staff regardless of whether the termination was at their instigation or the businesses.

  • How much notice is required to be provided, and is it worked or can you pay it out?
  • Do you have to pay redundancy if you are a small business?
  • Which components get taxed, which are tax free?
  • What about leave loading on unused annual leave?
  • What if they start taking all their sick leave?

Your payroll system may not be set up for all scenarios, you must understand your obligations

  1. What if you do find and error

You have all your ducks in a row and all your checks in place and still there is an error – don’t despair, it’s not quite in the category of wages theft yet.

  • Fix the error, check your calculations and make good to the employee
  • Check other staff who may also be affected
  • Work backwards by pay period until the error is found and corrected, if it is a once off or over the past 5 years you have to correct this. Finding an error and failing to do something about it is a breach of the Fair Work Act.  Like many businesses identified in recent times, it could be a financial and public relations disaster.

If you are running a business, it is your responsibility to ensure you understand your workplace obligations before you hire any employees.  If you are not sure, find out and find out NOW.

If you would like us to undertake a review of your payroll, review contracts against Award conditions and ensure the wording covers you, or if you would just like a fresh set of eyes to review your pay system and set up,  please contact wendy@gphr.com.au.

Article contributed by DFK Gooding Partners in Perth.

 

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