Recently, a large number of underpayment cases pinning the blame on payroll issues have made media headlines. First, we had George Calombaris’ restaurant group, then it was the Rockpool Group, and more recently, Woolworths admitted it underpaid its staff an estimated $300 million.
Now, there are a couple of points that these cases should raise for business owners.
Payroll is not easy. Payroll is not as simple as entering data into an accounting program and hitting finalise.
But when errors happen, it is not because of the accounting software. Errors happen because someone has input information somewhere along the process incorrectly.
There is usually always a human element — whether that is reviewing timesheets, entering timesheets, setting up staff in the system with pay rates attached, whether or not it is using an external program and pushing that data through to an accounting system, physically paying staff,or anything in between.
Somewhere along the line, there is a human element. Well, there should be.
In Australia, there are more than 100 awards to understand, and inside each of those awards, there are multiple pay rates that could apply. It is not as simple as saying you are going to pay someone $25 an hour and calculating a 10-hour day at $250. There are multiple things to think about.
The number of ordinary hours, the number of overtime or double-time hours, whether paid breaks are an option, what level within the award each employee sits at (which is based on the skills and qualifications of the employees), the job they are doing, public holiday rates, weekend rates, shift allowances, travel allowances, Centrelink deductions. All of these things need to be factored in for each and every employee on an individual basis.
There is simply not a ‘one-size-fits-all’ arrangement with payroll.
Australian payroll has been recognised as one of the top 10 most difficult payroll systems in the world to interpret and execute. And it gets that title for a reason. There is massive in-depth knowledge that needs to be undertaken to get it right. Payroll is not ‘pushing a button’. Yes, accounting software should make the process easier, but that is not your scapegoat.
Even for a small business owner who only has one employee, there is a multitude of checks and balances when onboarding an employee, when choosing pay rates, when setting up the employee in your payroll software, when processing payroll, when calculating leave entitlements and when making the payment to the employee.
When the shit hits the fan, turning around and saying it is an accounting software problem is not the answer.
In our business, for every single pay run we process for clients, we run multiple checks, balances, reconciliation reports, review employ contracts, review timesheets, review data from timesheet programs, we cross-check with the business owner for all new staff. There are a million questions we ask in order to process a pay run.
So, I guess I find it really frustrating that people assume payroll is just ‘clicking three buttons’. It is far more than clicking a button. For a business to be underpaying staff $300 million, there is a massive knowledge gap somewhere.
Most of those employees who are underpaid don’t even realise they are underpaid. They go to work and expect the person in charge of payroll knows what they are doing. But as you can see from these cases in the media, this is not correct. Payroll is not being processed correctly.
So, who is to blame? My view is it is not the accounting software. Responsibility needs to be pushed back to the business owners to hire and use qualified staff or qualified external contractors. People who are competent to do the job they are hired for.
In Australia, any external contractor providing payroll services needs to be a registered BAS agent or registered tax agent. If they are neither of these, as an external contractor they must be supervised by someone who is a registered agent. An internal employee doesn’t need to have those registrations, however, you would hope they have undertaken significant experience and training in payroll if they are performing that role.
But I really want to emphasise, there is help out there for business owners who need assistance with payroll.
Business owners can easily seek help understanding how to set up new employees, how to pay super correctly and on time, how to pay the right rates to employees — to ensure they don’t end up front-page headlines for the wrong reasons. But you need to be willing to pay for the expertise to keep you out of hot water.
An unregistered bookkeeper, or an untrained employee, could end up damaging your business beyond repair — not only in a monetary sense, but in stress and brand reputation. For many small business owners, a $5,000 innocent mistake could have a drastic impact.
Trust me, a small fee paid so you understand processes is way cheaper than a Fair Work audit and the cost of bad publicity when you hit the media headlines.
So, let’s start taking responsibility, and show the big players that small business owners take payroll seriously.