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How to stay on top of payroll and avoid underpaying staff

By Jack Campbell | |5 minute read

Organisations constantly pop up in the media with issues of staff underpayment. Chemist Warehouse is the latest to be hit with allegations, facing a $10 million claim.

According to Ben Thompson, chief executive of Employment Hero, much of the issue lies in the “outdated and massively complex” industrial relations system.

“If names like Chemist Warehouse are capable of making a $10 million payroll error with all their legal, HR and payroll resources, imagine the 98 per cent of Australian businesses that are SMEs, struggling to grasp the complexities of employment law,” said Mr Thompson.


“We need to create a country where business owners can hold their heads high and confidently grow their teams, knowing they are the best employers they can be. It’s time to address the complexity and make employing people easier and more rewarding for everyone.”

Adopting payroll software may be the key to assisting. With automation able to streamline processes, there is less room for human error.

“The system should make it easy to be an employer and instil greater trust between employers and employees. All these cases prove that too many businesses, including big corporations, cannot manage the system,” Mr Thompson explained.

“This is holding our economy back and preventing thousands of people from obtaining quality employment opportunities because employers are too scared to grow their business in such a difficult and risky environment.”

He continued: “We have to acknowledge the system is flawed – our employment framework originated in 1907, and it’s one of the most complex in the world. To pay one person, one hour, for one shift, you have to be across all 122 different awards because people cannot be paid one cent less than what they’re owed.”

To avoid running into issues, Mr Thompson outlined some ways to keep on top of your payroll and mitigate any chance of underpayment.

Banish the ‘set and forget’ mindset

“Ignorance is not an excuse when it comes to paying employees correctly – and regulators won’t show mercy. With three-quarters of businesses getting payroll wrong, the problem goes beyond employers, but if you haven’t already reviewed your current payroll processes – now’s the time to do it,” said Mr Thompson.

“Payment errors compound over time, so the longer it’s left, the more expensive it becomes. Ask the Fair Work Ombudsman for advice if you recognise an error and fix it while the discussion around payroll complexity is open. Make it your first priority to address and update outdated payroll processes, followed by implementing a regular reviewal system.”

Outsource payroll processes

“Business owners don’t think twice about outsourcing their accounting or tax, but there’s a different stigma associated with payroll – there’s a misconception that it’s easy to manage, but in reality, it’s a complex system that even large corporations can struggle with.”

Mr Thompson said: “Investing in compliance by outsourcing payroll is a simple way to build trust and gain peace of mind. Australia needs to become a country where business owners can grow their teams with confidence. We need to make employing people easier, and one way to do this is by outsourcing functions like payroll to experts.”

Keep digital records

“Modernising payroll is not just valuable for compliance – it gives business owners the opportunity to scale by eliminating redundant and time-consuming processes, simultaneously minimising human error,” explained Mr Thompson.

“Going digital also empowers your employees to be self-sufficient. Putting them in control of requesting leave, payslips and clocking in and out of shifts allows for easier management of staff records and rewards. It all contributes to creating a culture of trust through transparency, helping businesses improve employee satisfaction and reducing turnover.”

He added: “Invest in the foundation of your business by investing in compliance; a company culture founded on trust goes hand in hand with success.”

Jack Campbell

Jack Campbell

Jack is the editor at HR Leader.