Leveraging payroll for best practice wage compliance

Leveraging payroll for best practice wage compliance

As discussed by David P Sofrà, Adrian Wong, Paul Hum and Thomas Purnell, it is more important than ever for organisations to understand how changing hours and patterns of work may impact employees’ entitlements.

Man sitting at desk and computer

In the current regulatory environment, organisations need to have confidence in their payroll and compliance systems.

High profile and public conversations about industrial relations issues have drawn the attention of regulators and Government to the underpayment of employees.

In response, many organisations have been forced to consider how their payroll systems may have inadvertently led to non-compliance with applicable modern awards and enterprise agreements, along with the Superannuation Guarantee legislation.

While acknowledging that Australia has one of the most complex industrial relations systems in the world, regulators are now developing collaborative approaches to ensure that the implications of wage non-compliance are fully persecuted.

The ongoing Senate inquiry into the underpayment of employee remuneration and the establishment of five Workplace Relations Working Groups has brought to light important insights about how and where wage theft underpayment occurs in our economy.

New legislation introduced

The Federal Government has also recently introduced the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Bill 2020 (FW Bill) in the House of Representatives.

If passed, the Bill will introduce a criminal offence of wage underpayments where an employer:

“dishonestly engages in a systematic pattern of underpaying one or more employees”.

Government and regulators alike are now aware of the key structural challenges that lead to underpayments across many industries.

As a result, we have increasingly seen regulators use proactive compliance activities and data-sharing initiatives to ensure that employees receive their full entitlements.

The consequences of miscalculating an employee’s entitlements and remuneration can be high, resulting in damage to reputation and brand, large penalties, contrition payments and liability for back payment.

However, organisations that are on the front foot with their wage compliance can significantly mitigate these risks by voluntarily disclosing historical instances of non-compliance to regulators.

Voluntary disclosures

First steps of a voluntary disclosure process will typically involve establishing a ‘current state’ assessment of an organisation’s payroll system and assessing the requirements of the various industrial instruments that may cover and apply to each class of employee.

From there, the challenge is to ensure that the right governance systems are in place to ensure that employees are paid correctly going forward.

With the changing ways of work that have developed in response to COVID-19, it is now especially important for organisations to understand how changing hours and patterns of work may impact employees’ entitlements under pre-existing agreements.

In light of the increasing focus and capability of regulators, complex requirements and our dynamic working arrangements, it is essential that organisations act to ensure that they are doing the right thing by their employees.

Read the full report Navigating wage compliance complexity (PDF321 KB) which looks at:

  • Why is it so hard for many organisations to have full confidence they are getting it right?
  • How does your workforce profile impact wage non-compliance risk?
  • Are your systems fit for applicable industrial instruments?

KPMG Australia acknowledges the Traditional Custodians of the land on which we operate, live and gather as employees, and recognise their continuing connection to land, water and community. We pay respect to Elders past, present and emerging.

©2023 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation.

Liability limited by a scheme approved under Professional Standards Legislation.

For more detail about the structure of the KPMG global organisation please visit https://kpmg.com/governance.

Connect with us

Save, Curate and Share

Save what resonates, curate a library of information, and share content with your network of contacts.