[Australia] Closing Loopholes reforms increase likelihood of payroll errors

In Australia, research has revealed that more than half of the nation’s businesses will reconsider how they manage payroll as a ‘direct result’ of recent reforms, Accountants Daily reports.

Wage theft is now a criminal offence across Australia and it is only one among several legislative changes expected to complicate payroll compliance.

Going without one single payroll error over the last 12 months would reportedly place an Australian business in the minority. 

“With the new wage theft provisions, employers risk legal penalties for errors, which could severely harm the business,” Matt Loop - vice president and head of Asia at Rippling - said.

“We’ve already seen major Australian businesses be on the receiving end of this.”

The annual cost of wage theft to Australian employees is nearly $850 million. The new criminal offence only applies to intentional acts of underpayment, however, Mr Loop said the reform has brought a higher level of payroll error scrutiny.

The criminal offence was reportedly passed in a suite of industrial relations reforms - the ‘Closing Loopholes’ legislation - that serve to complicate payroll accounting.

As a result of the changes, “understanding and actioning the various nuances of the law becomes a time-consuming and laborious process,” he said.

Employers must, for example, now ensure that contract workers are paid no less than their permanent counterparts; taking into account bonuses, allowances and other benefits.

In a recent Rippling survey, 52 per cent of respondents stated that they believe the reforms will add more “complexity and stress to payroll functions.

The most common payroll errors included underpayment or overpayment (48 per cent), delayed payment (44 per cent), misgrading an employee (28 per cent) and failing to make superannuation payments (24 per cent).

Smaller businesses may have fewer resources to address the added complexities but Mr Loop reportedly said that payroll errors tend to scale with size.

Two-fifths (39 per cent) of small businesses reported payroll errors over the past 24 months. The rate for larger businesses grew to over two-thirds.

Operational complexity is a contributing factor; nearly a quarter of larger businesses relied on seven different payroll systems, compared with just 4 per cent of smaller businesses.

“The more solutions you have, the more times you need to syndicate employee data across systems and the greater chance of human error taking place,” Mr Loop said.

Point solutions - or, function-specific payroll, for example, in superannuation and tax filing - have been “fairly common” historically, the Rippling VP added.

Almost half (45 per cent) of companies said they were seeking to change their HR and payroll systems over the next year.

Mr Loop reportedly said it was “surprising” to learn that nearly half (48 per cent) of Australian businesses continue to rely on manual payroll. In addition to multiplying the risk of human error, manual payroll is extremely inefficient.

“Paying your employees is a fundamental part of operating a business, but it’s something that companies are getting wrong again and again,” Mr Loop said.

Source: Accountants Daily

(Quotes via original reporting)

In Australia, research has revealed that more than half of the nation’s businesses will reconsider how they manage payroll as a ‘direct result’ of recent reforms, Accountants Daily reports.

Wage theft is now a criminal offence across Australia and it is only one among several legislative changes expected to complicate payroll compliance.

Going without one single payroll error over the last 12 months would reportedly place an Australian business in the minority. 

“With the new wage theft provisions, employers risk legal penalties for errors, which could severely harm the business,” Matt Loop - vice president and head of Asia at Rippling - said.

“We’ve already seen major Australian businesses be on the receiving end of this.”

The annual cost of wage theft to Australian employees is nearly $850 million. The new criminal offence only applies to intentional acts of underpayment, however, Mr Loop said the reform has brought a higher level of payroll error scrutiny.

The criminal offence was reportedly passed in a suite of industrial relations reforms - the ‘Closing Loopholes’ legislation - that serve to complicate payroll accounting.

As a result of the changes, “understanding and actioning the various nuances of the law becomes a time-consuming and laborious process,” he said.

Employers must, for example, now ensure that contract workers are paid no less than their permanent counterparts; taking into account bonuses, allowances and other benefits.

In a recent Rippling survey, 52 per cent of respondents stated that they believe the reforms will add more “complexity and stress to payroll functions.

The most common payroll errors included underpayment or overpayment (48 per cent), delayed payment (44 per cent), misgrading an employee (28 per cent) and failing to make superannuation payments (24 per cent).

Smaller businesses may have fewer resources to address the added complexities but Mr Loop reportedly said that payroll errors tend to scale with size.

Two-fifths (39 per cent) of small businesses reported payroll errors over the past 24 months. The rate for larger businesses grew to over two-thirds.

Operational complexity is a contributing factor; nearly a quarter of larger businesses relied on seven different payroll systems, compared with just 4 per cent of smaller businesses.

“The more solutions you have, the more times you need to syndicate employee data across systems and the greater chance of human error taking place,” Mr Loop said.

Point solutions - or, function-specific payroll, for example, in superannuation and tax filing - have been “fairly common” historically, the Rippling VP added.

Almost half (45 per cent) of companies said they were seeking to change their HR and payroll systems over the next year.

Mr Loop reportedly said it was “surprising” to learn that nearly half (48 per cent) of Australian businesses continue to rely on manual payroll. In addition to multiplying the risk of human error, manual payroll is extremely inefficient.

“Paying your employees is a fundamental part of operating a business, but it’s something that companies are getting wrong again and again,” Mr Loop said.

Source: Accountants Daily

(Quotes via original reporting)