Over the course of my career, I think almost every organisation I have worked with has had a payroll issue at some point - usually it's an an administrative error due to an oversight, a system miscalculation, or a data-entry error. Whether you have someone working inside your organisation who is responsible for payroll, or if it is your bookkeeper who does it, having a regular (at least annual) process of auditing your payroll systems is best practice.
As a part of this audit, you may consider a number of factors relating to the payment of wages and salaries, including:
Current pay rate - does the rate in the system match the last pay increase, whether Award-based or market rate?
Salary benchmarking to current market rates.
How is leave loading paid? Is it paid/calculated based on the Award, or is it taken up in the salary? If the latter, how is it expressed in the Employment Contract? Is it superable?
Leave accruals - are they accruing correctly and is it the right accrual type?
Overtime, penalties and other Award entitlements - are any pay elements that make up an employee wage set up correctly, calculating correctly, and being applied correctly?
Time-keeping - how is this currently done and is there room for error (e.g. missed personal leave days because the employee forgot to submit a leave form)?
Record-keeping - are all employment, leave, salary, Award, timekeeping and payment records up to date and easy to locate in the event of an audit or claim?
This list just covers the basics. There may be a list of another 10 or more items that need to be considered based on your specific industry, processes and custom and practice.
Like any robust review process, you should keep asking yourself 'why' to figure out why things are done the way they currently are, and whether there is a better way to do them.
One of the most recent pitfalls to develop for organisations is related to salaried employees.
Many organisations pay their employees a salary. It is easier for everyone if the income is regular; and it offers the opportunity to have flexibility - you might be busy this week and need your team to put in a few extra hours and then next week it's a bit quieter and they can head home earlier.
Despite the benefits of a salary, there can be serious consequences if you don't get it right. You can view the short video about the 5 steps to compliance here or by going to the Video page of the website.
In March 2020, the Fair Work Commission inserted a new clause into over 20 Modern Awards relating to the payment of annualised wages/salaries. You can read more about these changes by going to: https://www.fairwork.gov.au/about-us/news-and-media-releases/website-news/new-rules-for-annualised-wage-arrangements.
Custom and practice in Australia over many decades means employers engaged employees on a salary via an employment contract (Common Law Contract), paying little or no notice to the Award that could classify the role, or what minimum pay and conditions may apply.
Complying with annualised salary clauses in Awards ensures employees are not disadvantaged when compared to the applicable Award classification; and as an organisation, the employer is not exposed to underpayment claims, investigations, and fines from the Fair Work Ombudsman (not to mention the reputational damage).
Most organisations will be impacted.
MYTH: High income earners are not covered by an Award. Just because an Engineer earns $150K p.a. does not mean their role can’t be classified under the Professional Employees Award 2020.
The Clerks – Private Sector Award 2020 has had an annualised salary clause inserted; and this may cover your support office functions, including Accounts, Reception/Administration, PA/EA, Payroll, Finance and Office Manager.
Organisations should conduct a review of all salaried employees to determine if their role is covered by an Award, if so, which one, which classification level would apply; and make a calculation comparing their current salary with the Award to determine the maximum number of hours the employee can work prior to being required to be paid an additional amount. This number of hours is called the “outer limit”.
Once completed, the employee is issued with a letter, confirming these details; retained as part of the employee’s time and wage records.
This task is quite complex. There are no hard and fast rules as to how roles should be classified, so we encourage you to seek some advice and support to complete this project.