Australian Payroll Association Says Limited Payroll Expertise Is to Blame for Employee Underpayments

At the beginning of February 2024, Australia Post, Australia’s national postal service, was forced to apologise to 3,600 employees for payroll errors spanning a decade. The mistake, worth AUD $5.6 million (USD $3.6 million) in wages to be repaid to staff, was blamed on payroll system errors it discovered occurred between 2014 and 2023.

The Australia Post news is the latest in a spate of underpayment scandals that have plagued Australia for years. Brands affected this year include Optus Retail, which needs to repay AUD $7.8 million (USD $5.1 million) to over 3,700 employees, as well as Australian Catholic University, part of the underpayment-prone higher education sector.

TechRepublic Australia spoke with Australian Payroll Association Director Tracy Angwin to ask if a change to payroll software could help prevent employee underpayment problems. We found that, while technology is often blamed for these errors, it is implementation and processes with lack of payroll expertise that are to blame.

The function of payroll software has remained similar over time

The basic function of payroll technology “hasn’t fundamentally changed in the last decade or more,” said Angwin. Organisations employ payroll systems to collect employee work data, interpret that data correctly and then produce financial transactions, such as employee payments, as well as do necessary “paperwork.”

While there have been advances in features, including payroll self-service portals, where employees can access and update their own details, and biometric devices, like fingerprint scanning to record time and attendance, Angwin said that, essentially, the functions systems are performing are not dissimilar to “the days of bundy cards.”

SEE: Looking for a new payroll system? Check out the top payroll software in Australia.

The payroll software market includes legacy and new providers. The APA’s 2023 Payroll Software and Services Directory, for example, compares 13 in-house payroll products, while its 2023 Australian Payroll Survey names CHRIS21, Employment Hero Payroll and ADP Payforce as the three most commonly used products. New players like global firm Rippling are entering the market in an effort to shake up the current status quo.

Australian organisations are still underpaying their employees

Organisations are still getting payments wrong, even though there have been limited drivers for change in the payroll system market. Australia’s Fair Work Ombudsman reported in October 2023 that it had recovered $509 million for 251,475 underpaid workers in 2022-23. This was the second consecutive year it had recouped more than half a billion dollars for workers.

Even the Australian government department responsible for overseeing federal workplace and employment conditions, the Department of Employment and Workplace Relations, was recently caught paying its employees incorrectly. The department had to pay back about $200,000 to rectify a more than $60,000 underpayment involving 99 staff.

The Australian Federal Government has been forced to move to criminalise wage theft. The 2023 Closing Loopholes Act introduces penalties for employers who intentionally commit wage theft, including fines and prison terms. But the complexity of Australia’s payment awards system means underpayments can still be made by mistake.

Technology is not usually at fault when employees are underpaid

Technology is often blamed for payroll issues, Angwin said, especially when things go wrong, like a public underpayment scandal.

“It is one thing for CEOs to blame when there is a payroll underpayment story. You can say it’s the system’s fault,” Angwin said.

This adds to the idea that, if you just get the technology right, it will solve the problem. However, technology systems are not often the main culprits. Instead, it is how they are set up and used in an organisation, Angwin said.

SEE: Australian IT pros should stay ahead of IT trends in 2024.

“I always like to give an Excel example. I am not particularly good at using pivot tables, but when I mess up, Bill Gates is not to blame,” Angwin said. “It’s the way I’ve set up the pivot table, not the technology developer.”

New global player Rippling has argued that consolidation in the number of payroll and human resources systems Australian organisations use could address some payroll issues by creating a “single source of truth for employee data.” A survey it commissioned from Censuswide of 500 Australian payroll managers found half of businesses in the market still rely on manually inputting employee data, opening up the door to error.

Payroll expertise and tech needed to minimise compliance risk

The difference between an employer making a system work for them or not is the way the system is implemented and used in processes, according to Angwin.

“Your people need to be fully trained in payroll legislation to both set up the technology properly and monitor the outputs of the technology are correct,” she said.

Many of the highly public underpayment issues that have been affecting both private and public sector companies come as a result of these organisations setting up processes and then relying on them completely, with no one going back to check them, according to the APA.

“They are at risk of setting up technology and not checking it,” Angwin said.

Rippling VP and Head of Asia Matt Loop said improving the experience for payroll professionals through fewer software systems could support better payroll processes.

“It really is a combination of great tech and great people and empowering people to focus on what they care about and what’s most impactful for the company,” Loop said.