Could you be paying the price for incorrect payroll?

Thursday August 8, 2019

A reminder for payroll cut-off pops up in your calendar. How does it make you feel? If you have someone in place to manage payroll for your business, you might dismiss it without a second thought. But, if you are managing payroll yourself, it could be an unwelcome interruption to your day.

Award calculations, tax, terminations and changes to Fair Work Legislation can make payroll a long and complicated process. The thought alone can instigate a headache.

Paying employees correctly and on time is not only a legal requirement but also an essential function of any successful business. To put it simply, you expect employees to turn up and work, and they expect to get paid. This agreement forms the foundation of your employment relationships. So if payroll goes wrong, it can cause all sorts of problems.

Whether an honest admin mistake or complications caused by a difficult situation with an employee, payroll problems can get ugly. They also come with a high price to pay. Along with time spent getting back on track, can come back payments and sizable fines.

There are many tricky aspects of payroll to be aware of, we have listed some of the riskiest below.

Withholding wages

There may be times when an employee fails to complete work to the standard expected and you feel it justified to deduct their wages. But be warned, this is a risky move. Failure to pay someone wages that they are entitled to is known as an unlawful deduction and can bring a Fair Work claim against you.

In fact, this bad practice is widely known, and the government is moving to criminalise wage theft.

Inaccurate calculations

Correct calculations are imperative for payroll. If an inaccurate calculation has been applied and left in place, mistakes can multiply. Celebrity chef George Calombaris faced this reality when Fair Work inspectors found his hospitality group to be owing employees $7.8 million in unpaid wages and superannuation payments. Chef Calombaris admitted that, “as a small business we did not have the necessary systems and processes in place, particularly as the business grew.”

Using payroll software should give you peace of mind that calculations are accurate, and that PAYG is being processed correctly. But if the tool you are using is not managed correctly, you could be at risk of underpaying staff. Anyone in charge of managing your payroll software needs to be informed on how to keep systems maintained.

Incorrect classification

We see this a lot. Misclassification of employment types, and the awards and entitlements that go with them, can result in underpaid wages. In addition to back paying employees to rectify errors, employers can be subject to huge fines from the Fair Work Obudsman.

Global Interactive Operations Pty Ltd are a recent example. The call centre operator missed vital casual loading payments and penalty rates for overtime. The result? They have been tasked with paying $77,286 in unpaid wages to employees.

Each employment type comes with specific entitlements and it’s important to know the difference when hiring staff for your business and processing payroll.

Need advice on payroll?

If processing payroll for your company has become a major pain give us a call. We’ll make sure you’re compliant and give you the time back to focus on developing your business.

Preventing People Problems

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