With a ramp up in litigation by the Fair Work Ombudsman (FWO) and the recent introduction of Single Touch Payroll (STP), employee pay reporting processes are under the microscope on multiple fronts. If it wasn’t already, payroll governance needs to be a priority at the Board level.
The first full year of STP reporting is now complete and providing the Australian Taxation Office (ATO) with unprecedented levels of payroll data. In a recent announcement, ATO Deputy Commissioner James O’Halloran said that employers have already started receiving “gentle reminders” regarding late superannuation contributions in an effort to track and boost super compliance. With this shift in enforcement activity and new data sources enabling regulators to be much more proactive, Directors will be particularly interested given the potential for personal recourse against them should a superannuation guarantee (SG) liability remain unpaid.
From an employment law perspective, the list of companies in the FWO’s radar is far reaching. From the much publicised recent case of a celebrity chef to large retail chains and banks, it is clear payroll errors can result in far bigger reputational damage than the shortfalls involved.
Board mandated annual reviews of payroll processes and controls are likely to become the norm in the future. Where “set and forget” controls or human error exists within payroll systems (e.g. wage codes), there can be an upside with audits being just as likely to reveal both opportunities and savings. For example, in April it was revealed that Queensland Health employees have been overpaid $39.4m and last year the Northern Territory Government advised of 743 overpayments to staff.
Taking action – maintaining board reputation and accountability
Whether using a traffic light approach or deep dive inquiry, payroll reviews should provide clarity around the following remuneration questions:
- Are we under/over paying salary vs awards?
- Are super payments consistent with ordinary hours worked by employees?
- Are contractors considered “deemed employees”?
- Are employee entitlements in accordance with statutory regulations/awards?