Building Connection Spring 2018

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6 2 ACROSS THE TRADES Spring 2019
GOING UNDER
A PAYROLL EXPERT HAS REVEALED SEVEN REASONS WHY COMPANIES GET CAUGHT IN UNDERPAYMENT SCANDALS.
Australian Payroll Association
E very few months sees a major employee underpayment
scandal – companies announcing that they have made
payroll errors that have impacted thousands of employees
– go public. Examples are the $43 million error by Rebel Sport
this year, the $2 million error by Lush Cosmetics last year, the $1
million in underpayments by Maurice Blackburn and more than $1
million in underpayments by Rockpool.
These types of errors are often identified and corrected
by payroll expert Tracy Angwin at Australian Payroll
Association, an industry network that has helped hundreds of
organisations over 25 years ensure their payroll meets their
legal requirements.
Tracy says underpayments are
more common than one might think.
“The various clauses across the 122
employee awards in Australia, as well
as Federal- and State-based legislation,
are extremely complex. At times, even the
relevant Government bodies have not been
able to answer our questions when we ask for
clarification. In addition, legislative changes
occur weekly,” she says.
“The errors behind the scandals are often a
result of inadequate training given to payroll
managers. The Australian Payroll Association’s
2019 Benchmarking Report reveals that the
average payroll manager has just 2.6 days of
training a year. Yet they are responsible for millions of dollars in
payments and ensuring those payments meet the law.”
Tracy reveals the most common payroll mistakes and
oversights that usually lead to such scandals.
The 7 mistakes that lead to major employee
underpayments:
1 Incorrect calculations in overtime provisions.
Mistakes are made when organisations do not ensure
every ruling on overtime has been considered for
employees. Many employee awards have numerous sections
on overtime – for instance in the ‘overtime’, ‘breaks’ and ‘part-
time work’ sections. One often overlooked ruling is overtime.
Employees must receive a minimum of 10-hour breaks
between shifts. If their break is fewer than 10 hours, under
some awards – such as those governing hospitality, aged care
and social service employees – they must be paid overtime
rates thereafter, until they receive their full 10-hour break.
2 Underpayment on termination. The most common
error here is payroll managers failing to refer to the
Fair Work Act, in addition to the relevant employee
award. The Act entitles employees over age 45 who have had
at least two years of service with the company to receive one
additional week of notice upon termination.
3 Failing to pay overtime penalty rates to part-time
employees. Many organisations erroneously place
the same rules on overtime payments to part-time
employees as to full-time employees. However, some common
employee awards – such as the retail award and clerks award
– require overtime penalty rates to be paid to part timers when
they work more than their contracted hours. This is where
underpayment mistakes are commonly made.
4 Superannuation
underpayments. Many employers
fail to pay superannuation on
employee payments on top of regular
wages or salary. Super should be paid
on any employee payment that is
regarded as ordinary time earnings –
this includes bonuses, leave loading,
payment in lieu of notice of termination,
and cashed-out annual leave.
5 Only paying the base rate
on annual leave payments.
This is an error that Australian
Payroll Association has identified across
multiple organisations in the health support
services and manufacturing sectors. The awards
governing employees in these sectors require that annual
leave payments should include the full payments owed to
the employee if they had worked. This includes penalties and
allowances, not just the base rate of pay.
6 Excluding commissions and bonuses from long
service leave. Many employers do not include
commissions, incentives and bonuses when they
calculate the value of long service leave. These payments
should be included when long service leave is paid.
7 Lack of payroll reviews and outdated systems.
A major oversight that contributes to all of the above
errors are failing to review the accuracy of payroll
systems alongside legislative changes – therefore new
regulations that benefit employees are not implemented.
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