The case for the chief payroll officer

No Australian board sets out to underpay its staff, yet the country’s largest employers have repaid more than $1 billion in five years. The problem is structural, and it starts with payroll’s place on the org chart, writes Brooke Hedger.

The University of Queensland signed an enforceable undertaking with the Fair Work Ombudsman this month, after underpaying 16,382 staff about $11 million. The regulator blamed “incorrect payroll system configurations, clerical errors and other oversights”.

It was the 15th Australian university to sign one. Two days later, Murdoch became the 16th.

The pattern is not confined to universities. In late 2019, Woolworths disclosed it had underpaid salaried staff by up to $300 million. Seven years later, it provisioned a further $710 million for the same thing.

Answering for underpayments is not the same as fixing them.

The Fair Work Ombudsman has recovered more than $2 billion in five years, and just over half of that came from large corporate employers. Westpac, the Commonwealth Bank, NAB, Coles, and BHP have all repaid staff, signed undertakings or paid penalties.

Intent alone does not explain the pattern. BHP found it had been deducting leave incorrectly on public holidays going back to 2010, affecting almost 30,000 people, and reported itself to the regulator. Capable people and good intentions can coexist with a structural problem.

So how do organisations committed to paying people correctly get it wrong for years without noticing?

Australia’s industrial landscape is complex. Payroll must translate legislation, awards, enterprise agreements, contracts and policies into what each person is paid. Yet many of the decisions that affect that outcome are made by people who are not payroll or industrial relations specialists.

Managers approve time. Rosters are built. Employment conditions change. Systems are configured. Each decision can look reasonable on its own, while the interaction between them produces an outcome nobody intended.

Payroll is where those consequences become real. It sees how employment rules, systems and workforce practices work together, and where they do not. That makes it a source of insight into the organisation, well beyond processing pay.

When something goes wrong, it looks like a payroll problem. More accurately, it is an organisational problem that payroll happened to reveal.

When Super Retail Group underpaid its retail managers, the board cut the chief executive’s bonus to zero and reduced its other executives’ bonuses by a quarter. The board “was disappointed with the lack of executive oversight that led to this issue”, chair Sally Pitkin said.

That raises the obvious question: oversight by whom?

According to the Australian Payroll Association, 52 per cent of payroll functions sit under finance and 37 per cent under HR.

Both are essential partners. But their responsibilities do not necessarily give payroll’s full range of risks a clear executive owner.

Under a chief financial officer, payroll can become primarily a cost line: what it costs, how it is allocated, what it will be next quarter. Finance needs that information, but it is only part of what payroll does.

Under a chief people officer, payroll is a people service. HR owns much of the employee life cycle, but payroll operates within a compliance framework that extends well beyond HR.

Technology sees the system. Operations sees the workforce. Those perspectives all meet in payroll, which can be left working with technology it did not select, processes it did not design and requirements it had little opportunity to shape.

Outsourcing the processing does not resolve that gap. The organisation still needs someone accountable for whether its people are paid correctly.

Other risks of this scale have clear executive ownership. Money has a chief financial officer. Technology has a chief information officer. People have a chief people officer.

So why not a chief payroll officer?

Call it that, or call it something else. Someone needs to understand payroll risk in its entirety and have enough authority to influence the decisions that create it.

I’m not arguing that every payroll manager should automatically join the executive team. Payroll expertise alone is not enough. The role requires commercial judgement, breadth of experience and the ability to explain what operational detail means for the business and its board.

That person should have a budget, a meaningful voice in technology decisions that affect pay and the authority to challenge requirements that introduce unnecessary risk. They should have the standing to take the organisation’s payroll position directly to the board.

The objection is that payroll already has a voice through the executive it reports to.

But having access to the table is not the same as having a seat at it. In many organisations, strategy is set by HR or finance and payroll is asked to operationalise the decision. I have sat in enough of those meetings to recognise the pattern.

Good payroll professionals push back. But there is a difference between advising on a decision and being part of making it.

The people who can see the payroll risk are not always the people with the authority to change the upstream decisions creating it. The people who can change those decisions do not always have the payroll expertise to see the risk.

That is the gap.

The answer is not another silo. Payroll belongs in the boardroom because it connects the silos.

It can tell HR what employment policies look like when they meet real pay outcomes, and finance what workforce costs look like beyond the ledger. It can help technology teams understand how system design affects pay and operations and understand where rostering practices create risk.

And it can tell the board where seemingly unrelated decisions converge into one outcome: what people are paid.

Giving that perspective, executive authority would help the organisation make better decisions before payroll has to deal with their consequences.

The next step is not to ask payroll to work harder. It is to invite payroll into the room earlier.

That is where the next billion dollars of remediation can be avoided.

Brooke Hedger is the chief revenue officer at Payroll Standard. She previously led the Workforce and Payroll Solutions Advisory practice at Deloitte and has run payroll functions at St Vincent’s Health Australia, Cotton On (across 22 countries) and Bendigo and Adelaide Bank.

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