Managing payroll is one of the most critical functions for a business, but it can’t be managed with a set-and-forget mindset (no matter the size of the company). Payroll is becoming increasingly difficult for businesses to manage. With on-going changes to legislation, reporting, processes, and security regulations, navigating compliance requirements can be complicated.
In August 2022, an Australian natural gas and electricity operator identified employee payment errors following an independent review of its payroll systems. Over the past seven years, the company realised it underpaid hundreds of employees an estimated $32 million, blaming the complexity of its enterprise agreements for the error.
Mistakes, large or small, can leave a black mark on an otherwise reputable company profile. Businesses that stray from the right side of the law often don’t mean to, but the consequences are the same as if they were intentional. Businesses that frequently run into challenges are those that are growing exponentially and that may not have the right tools, strategies, and training to support and keep up with an increasingly complex payroll.
To save time and money in a complex payroll landscape, watch out for these five common errors:
1. Misclassifying employees
Employee misclassification can occur when an employee is mistakenly classed as an independent contractor or freelancer rather than an employee. Misclassification leads to overpayment or underpayment of wages and can land the employer in hot water. In Australia, breaching workplace obligations under the Fair Work Act can result in investigation and prosecution by the Fair Work Ombudsman (FWO) and incur significant financial penalties and back payments. A fully managed payroll service provider can correctly classify employees, helping businesses worry less about non-compliance and focus more on value-added tasks.
2. Miscalculating pay
Miscalculating pay or failing to pay overtime is a common occurrence across countries, industries, and job roles. It usually happens because of human error and can be extremely frustrating for employees who must constantly follow up until there is a resolution (if they’re lucky). Overpaying or underpaying employees, missing the first pay for new employees, or deducting the wrong benefits are common scenarios that cause a lot of stress for the individual, and may also impact a business’s reputation. The solution? Taking advantage of a fully managed payroll provider that offers a robust payroll system with a comprehensive employee database will automatically calculate payments each pay period and get them right every time.
3. Failing to keep up with legislative changes
Payroll compliance is a hot-button issue — especially in Australia and New Zealand. Legislation changes regularly, impacting payroll administration, records, tax liability, and superannuation. Failing to accurately pay entitlements owed to employees, and making mistakes around employee classification and awards, can result in financial penalties, reputational damage, and, more seriously, imprisonment for wage theft. For many businesses, the best solution to the payroll compliance challenge is to engage the a payroll provider with the right expertise, access to standardised payroll processes, and a network of local specialists.
4. Infrequent payments
It’s no surprise that employees want to get paid on time. Many depend on it so they can pay rent, make mortgage repayments, and purchase food and other essentials. They don’t need the burden of worrying about whether or not their pay will be in the bank on time.
If payroll is processed late, it causes delays and problems for employees, and can dampen employee morale and productivity. When employers may already be struggling to hire and retain great talent, something as easy as paying people on time can give you the edge over the competition.
Outsourcing payroll ensures employees get paid consistently and have 24/7 access via self-service to check payslips anytime, anywhere, and on any device.
5. Incomplete or inaccurate records
Keeping accurate records is best practice, but not all businesses do it. An unorganised and inefficient payroll process, that includes manual, paper-based workarounds, leads to errors that can take months to uncover and even longer to solve. It can also result in missed employee payments.
Providing false or misleading records can also lead to fines should a business be audited. By automating the payroll process and integrating payroll personnel with other human resources activities, businesses can ditch error-prone manual processes for good.
Pay your employees the right way
Outdated technology, failing to stay up to date with legislation, and ignoring risks are common yet avoidable payroll mis-steps. Mistakes resulting from these can lead to non-compliance, reduced productivity, poor brand reputation, increased costs, legal challenges, and more.
Fortunately, only two elements are required to safeguard your company’s payroll: the right software and the right professionals.
Affinity’s managed payroll service lets you streamline payroll processes while limiting errors and achieving compliance. Our modern, world-leading technology delivers employee self-service and manager dashboards, while our team of experts provides helpdesk and direct staff support.
When it comes to people’s livelihoods, it pays to get payroll right. To avoid costly payroll mistakes, contact the Affinity team today.
For over thirty years, Affinity has been a trusted partner for mid-market and enterprise businesses in Australia and New Zealand, empowering them to transform their payroll operations. With a focus on turning payroll from a cost into an asset, we have established ourselves as industry leaders in delivering innovative cloud-based payroll software and exceptional payroll services.
