Businesses have been warned against simply relying on software to identify and rectify payroll errors in the wake of a number of high-profile cases.
‘Fallacy to think that a system can automate payroll’
Speaking to Accountants Daily, Australian Payroll Association chief executive Tracy Angwin said the recent spike in businesses discovering payroll errors highlighted the need for employers to seek out qualified payroll specialists.
“Relying on a ‘system’ to ‘identify when a change to an award or legislation occurs and adapt accordingly, rather than relying on annual reviews’ is extremely dangerous,” Ms Angwin said.
“Employers should never rely on systems identifying errors and rectifying payments. Only trained payroll professionals, either in-house or outsourced, should be relied on to do this.
“Otherwise, you are potentially putting your payroll compliance in the hands of a developer who may or may not have a good understanding of payroll legislation.”
Fair Work Ombudsman director of knowledge Cletus Brown had also recently attributed the increase in underpayments and payroll issues to unsustainable payroll functions in businesses.
“Some of the larger businesses may have taken their eyes off the ball and not employ as many payroll specialists,” Mr Brown said.
“Quite often, we’ll deal with businesses and we’re staggered that only two or three people are looking after payroll for several thousand staff, and that’s not sustainable, really.”
Woolworths most recently admitted to a possible $300 million payroll error, eclipsing retail rival Wesfarmers’ at $15 million (plus a separate, as yet undisclosed figure at its Bunnings Warehouse chain), the $7.8 million at former Masterchef judge George Calombaris’ MAdE Entertainment and even the possible $25 million bill faced by Michael Hill Jewellers.
Big four accounting firm EY had also acknowledged payroll issues this year, after it began outsourcing its payroll function to Automatic Data Processing (ADP).
“Most payroll errors are caused by incorrect system set-up — choices made by humans, not ‘systems’, or untrained or unqualified payroll staff making incorrect decisions,” Ms Angwin said.
“It is a fallacy to think that a system can automate payroll when there are so many decisions that need to be made in the payroll process.”