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One-third of employers make payroll mistakes every month: APA

One-third of employers make payroll mistakes every month: APA

It’s rare that we’ve got anything to be thankful to reality tv for, but the furore over George Calombaris’ $8 million underpayment scandal may change all that. The media attention suddenly being applied to employee underpayment would likely never have occurred if it weren’t for Calombaris’ high profile on MasterChef.

New data released by the Australian Payroll Association (APA) indicates just how widespread the problem is. One in three (33%) organisations admit to making a mistake in every single monthly pay run and 21% do the same every quarter.

In many instances (45%), the mistakes aren’t picked up by payroll managers, but by the employees themselves.

While larger companies are more likely to make payroll mistakes, smaller businesses have their own problems when it comes to paying their staff correctly.

In New Zealand, 2016 figures from the Ministry of Business, Innovation and Employment estimate the annual cost of payroll underpayments is $2 billion, impacting 700,000 Kiwis every year.

According to the APA data, the number of mistakes varies according to organisation size. Some 20% of organisations with 1-10 employees admit to making late payments to staff, compared to just 11% of larger organisations. In addition, 22% of these “micro-businesses” admit to making late superannuation payments, while only 3% of organisations with over 1,000 employees had the same issue.

Unfortunately, some sectors are much more prone to payroll errors. The APA data indicates the most common cases of underpayment occur in the social assistance, healthcare and disability services sectors. All three admit to making payroll mistakes 43% of the time – and these industries also had the highest percentage (12%) of late payments.

Apart from reputational damage and the obvious financial repercussions of underpayments, separate research indicates that 25% of employees will start looking for another job after just two payroll mistakes.[1]

“Getting paid late or being paid the wrong amount has a huge impact on employer and employee trust. It can also reduce employee morale which is a contributing factor for excessive turnover in organisations,” says Australian Payroll Association CEO Tracy Angwin.

“With more companies facing employee underpayment scandals, it has become crucial for organisations to minimise the incidence of payroll errors. Accurate pay and entitlements involve making not only the correct pay and award calculations, but accurate leave entitlements and superannuation contributions within the correct timeframe.”

The full repercussions of the Calombaris debacle are yet to be seen. There’s growing sentiment that underpayment of staff – whether accidental or purposeful – is akin to wage theft, and should be dealt with in the same way as other forms of theft. Instead of a slap on the wrist and a fairly insignificant fine, this could mean criminalising the action.

During a recent question time in parliament, Prime Minister Scott Morrison announced that Attorney-General and Industrial Relations Minister, Christian Porter, is currently drafting legislation around criminalising worker exploitation.

Employers are urged to get their house in order and watch this space…


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[1] The Workforce Institute, Risky Business Survey, 2018