Businesses should check how regularly they update their HR, time and attendance and payroll systems, recommends PwC.
More Australian businesses may look closely at their payroll and accounting software after learning that there could be up to $1.3 billion in underpayments nationally each year.
That’s an estimate by PwC, which has released a high-level report looking at the problem of employers underpaying workers. The report points to construction, healthcare and social assistance, accommodation and food services and retail as the sectors where workers are most at risk.
PwC’s estimate, reported by The Australian, follows a spate of admissions about wage underpayment by high-profile organisations. Unions have reportedly asked for jail terms or multimillion-dollar fines in cases of deliberate underpayment.
Of course, if you own or manage a small business, this issue is also relevant to you. PwC points out that it can be time-consuming for small and medium-size businesses to make sense of industrial relations variables.
And it argues that it’s easy to make mistakes, because the wage system is complex - some industry awards include more than 10 rules affecting overtime accrual.
"Safety net entitlements such as overtime, penalty and shift rates are interdependent and may differ within a single award depending upon employment status and work type," PwC’s report states.
PwC isn’t holding back when it comes to discussing the potential risks for businesses that make mistakes: “In many cases, one small error in a system can become a multimillion dollar liability by the time it is discovered, many years down the track.”
PwC recommends business leaders ask how regularly their business updates its HR information systems, time and attendance systems, and payroll systems.
The Australian Small Business and Family Enterprise Ombudsman Kate Carnell has suggested authorities address the issue by harnessing the accounting software used by Australian businesses.
“The rollout of single touch payroll provides an opportunity to calculate award wages and entitlements through an algorithm integrated into accounting software such as Xero, MYOB, Quicken and other software systems,” Carnell stated.
She suggests the Fair Work Commission could own and update such a payment algorithm to make sure wage payments are correct.
You may have updated some of your software to comply with Australia’s new Single Touch Payroll (STP) reporting requirements. For example, you may have decided to start using standalone payroll software (or upgraded your accounting software to add payroll functionality) when you began reporting payroll details to the Australian Taxation Office through STP.
If you haven’t checked your payroll and accounting processes, news about wage underpayment is one more reason to do so.