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The Consequences of Payroll Error

The Consequences of Payroll Error

posted on September 28, 2018

The awards system in Australia is very complex, and a spate of recent cases has illustrated the importance of having detailed documentation around employment contracts and timesheets as well as good quality payroll software. Poor payroll systems can result in significant underpayments of both wages and superannuation guarantee (SG).

Single touch payroll commenced on 1 July 2018 for those with 20 or more employees and legislation is in parliament to expand it to include employers with 19 or less employees from 1 July 2019. With single touch payroll, you report your payroll in line with your pay cycle being weekly, fortnightly or monthly. This means it is an opportune time to look at payroll software and ensure it not just is STP-enabled but also able to handle our awards system.

In July 2018, Lush Cosmetics Australia admitted it had underpaid over 5,000 workers by $2 million over the past 8 years due to a payroll system error. This occurred with the 2010 transition to the Fair Work Act’s system of modern awards. The errors were not deliberate.  Lush has a history of doing the right thing by their employees; rather the underpayments related to intricate elements of the Retail and Manufacturing awards. Lush stated the following examples of errors made ”when shifts were worked without the minimum 12 hour break in between, when staff worked more than 11 hours in one day, when part-timers worked outside their contracted pattern of work without sufficient documentation in place.”  In order to correct the error, the last 8 years of handwritten timesheets will be scanned, indexed, entered into payroll software and rerun. The cost of which is $1.5 million plus any penalties they may incur like the super guarantee charge (SGC).

 

Click here to read Effective PD Director Deanne Firth’s full article in Accountant’s Daily.  To learn more about this topic, subscribe to Effective PD’s webinar.  To subscribe, visit www.effectivepd.com.au. Effective PD offers an innovative way for busy accountants to be on top of their game with continuing professional development in a brief, flexible and easy way.

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