Major payroll scandals had been reported for some time prior to COVID-19, but the risk remains.

risk managementSome well-known companies and franchises have been caught out underpaying their staff and penalised through the Courts. In many situations, it has been reported that some of these companies had “out-dated’ payroll systems.

Whilst outdated systems can contribute and sometimes be the main cause of payroll errors, recent RSM experience of working with clients with “pay” issues, has also uncovered major risks with the other two main ingredients, namely: People and Process. 
 

“Organisations that have consistently demonstrated good payroll practice and outcomes have successfully managed the following key components:

People: suitably qualified, knowledgeable, and trained practitioners

Processes: clear responsibilities, timelines, accuracy, and application

System: implemented and configured to support accurate and timely pay and provides the appropriate level of reporting”

Jaime Lam, Principal – Risk Consulting, RSM Australia

Some of the lessons learnt from our recent experience from payroll audits and reviews, where the workforce includes shift workers and multiple awards and/or Enterprise Agreements (EA) are:

Your Payroll People

  • Risk managementDo they have the skills and ability to interpret and apply complex EAs and Awards?
  • Is there an independent person/party that can assist with interpretation and application when a new or updated EA and/or Award is put in place?
  • Does your organisation’s payroll person understand the definition and application (in your payroll system) of ordinary times earnings (OTE) visa vi salary and wages (S&W) – misunderstandings often lead to compulsory superannuation underpayments
  • Training of payroll staff members in the use of your payroll system. Often we have found that the system has been installed with many features turned-off resulting in more manual processes. Additionally, each set within the system may have an impact on the application of PAYG, payroll tax, superannuation, etc.
  • Cross skilling of smaller payroll team: Are you single point sensitive? One organisation was reliant on a single staff member to answer most of the payroll queries we raised.

Your Organisation’s Payroll Processes

  • Are there long delays before EAs and Awards changes are implemented?
  • When making major payroll changes for EA and/or award increases, are there appropriate validation processes to check the accuracy of what is applied in the payroll system?
  • Do you have delegated authorities/rules governing payroll? Are they applied consistently and accurately, even with a change of payroll staff members?
  • Are there processes and controls to pick up any abnormalities? An internal audit or a payroll review is a good starting point.
  • Does your organisation ensure that records are adequately retained?

Yrisk managementour Payroll Systems

The “system” related factors we have detected often involve the implementation and or use of the given payroll system. Some examples to consider:

  • Configuration of the payroll system – do you understand how your system is configured and how it impacts payroll processing? Is the accuracy of your payroll compromised by out-of-date system configuration?
  • Pay codes – do you know what each pay code is used for and whether it is a paying code? How do you ensure consistency in the application of pay codes?
  • Have you undertaken a pay code review? Often payrolls contain outdated or defunct codes that can clog the system.
  • Have you ever utilised data analytics on information from the payroll system? Start by identifying whether you have any pay abnormalities which require investigation.

HOW CAN RSM HELP?

Do you have a question, or require assistance, regarding payroll in your organisation? Get in touch with your local RSM Office for more information.