Payroll Compliance Series Part 5 - Provide Full, Integrated Corrective Actions
The Fair Work Ombudsmen (FWO) recently outlined eight elements for payroll remediation success. These elements provide organisations with clear guidance as to the FWO's expectations of employers when undertaking payroll remediation programs. In parallel to calculating back payments and making payments to current and former employees, the Fair Work Ombudsmen (FWO) expects employers to be able to show that they are investing in payroll and compliance capability and training, as well as in systems, processes and technology to support this capability.
Where underpayments are reported in the media, the headline is typically the estimated amount, the number of employees impacted over a period of time and the cause simplified to ‘system errors’. More recently there have been articles published comparing the back payment amounts calculated to the total cost of the remediation program. Depending on the size of the remediation program the program cost can be significantly higher than the back payments calculated.
Why is this the case? Put simply, underpayments are rarely the result of isolated system configuration issues. Whilst system configuration issues often contribute to payment errors, they are typically one component of many considerations in an organisation’s end to end payroll operating model. Detailed below are the key considerations organisations must address when undertaking a payroll compliance program to ensure sustainable payroll compliance.
Calculating back payments cannot be undertaken in isolation of addressing the root cause(s) of non-compliance. Organisations that focus solely on back payment calculations will be caught in an endless cycle of back payment calculations until the root cause(s) are remediated.
Each component of your payroll operating model must be reviewed – people (capability), structure, process, governance and all interdependent systems (HRIS, WFM and Payroll).
Many payroll compliance issues originate upstream, (e.g. operations, onboarding etc.). It is imperative the relevant stakeholders are engaged across the organisation to ensure a whole of business response.
It is wise to leverage relevant external expertise to support your remediation program. Yes this can, and often does get expensive. However, you will likely require access to a range of expertise that may not exist within your organisation (e.g. employment tax, super and employment law advice, systems support, governance, change management, process reengineering).
Managing both Board and Executive expectations is critical. It is common for remediation programs to run for two years or more. It is also common for additional compliance issues to be uncovered as the program in underway and some of these may impact previously made back payment calculations to employees.
Many organisations are in the process of creating HR Technology Roadmaps and/or implementing new systems to support (amongst other objectives) payroll compliance. Failure to manage these programs of work as business led, as opposed to IT led often lead to further payroll compliance issues (and the subject of a separate future article).
Talk to us - Impact HRT. We have extensive experience managing large payroll remediation programs including preparing all documents and data requested by the FWO, planning your payroll remediation program, managing back payment calculations, remediating processes, strengthening governance, building internal capability, and overseeing integration and system changes to resolve your payroll compliance issues.
Contact us: info@impacthrt.com.au Visit our website here
The information provided in this article is general in nature and should not be relied upon for any specific or individual scenario. Always seek qualified assistance in navigating employment and labor law
