Is Your Company Making These Payroll Mistakes? 6 Common Problems and How to Fix Them

While payroll mistakes are surprisingly common, they can result in hefty fines and severe reputational damage.

If your company has uncovered a payroll error recently, it’s not the only one: 33% of Australian payroll managers report making mistakes on a monthly basis.

Yet while payroll mistakes are surprisingly common, they can result in hefty fines and severe reputational damage. In a recent study, PwC states that Industrial relations risks such as the underpayment of Australian workers’ entitlements, estimated at $1.35 billion per year, is one of the top five sleeper issues for business leaders in 2021. 

Whilst Australia has the 2nd most complex award system in the world, most of the time, compliance issues are often due to simple human error or manual processes.  A worker is misclassified, a timesheet is misread or a tired staff member misunderstands superannuation requirements. Let’s look at some of the most common payroll mistakes and how your company can avoid them.

Mistake #1: Misclassifying Workers

Australia’s Modern Awards system means that classifying workers can be complex. The Hospitality Industry (General) Award alone, for example, lists 61 different classifications for adult workers. 

To avoid misclassifying workers, make sure that payroll isn’t allocated just to the finance department. HR needs to be involved so it can correctly input workers’ classifications and update them as required. Time spent upfront when setting up your system can avoid errors downstream.  Humanforce’s Award Interpretation and Compliance Management tools  also have built-in alerts that will warn you of potential issues.

Mistake #2: Calculating Superannuation Incorrectly

Superannuation seems simple, but it’s easy to accidentally underpay your workers. You need to contribute a minimum of 9.5% of ordinary time earnings (OTE) for every employee whom you pay more than $450 per month or who, for minors and domestic workers, works more than 30 hours a week.

Mistakes normally happen when companies incorrectly understand what is included in OTE. Employers may forget to pay superannuation on bonuses, cashed-out annual leave, leave loading where it is not connected to overtime and more. One particularly common error is not including shift loadings and so-called “overtime” in OTE for casual workers or any staff for whom there are not stipulated ordinary hours of work.

Mistake #3: Underpaying Overtime

The complicated rules surrounding overtime rates can be tricky to untangle. Depending on the award, rates can vary depending on the day, date, time and duration of the extra hours. Shift workers and part-time staff may also be subject to different overtime rates than full-time staff.

Some awards also stipulate required break lengths between shifts; any time the worker returns to work before receiving their entire break, that entire second shift will be classed as overtime. 

Humanforce’s workforce management software can help you keep track of your company’s relevant award requirements, in addition to determining the exact amount of overtime pay that workers should receive. It will also alert you to potential compliance issues relating to scheduling too much overtime or insufficient break lengths.

Mistake #4: Relying on Pen-and-Paper Timesheets

Whether it’s because of poor handwriting, the incorrect date being written at the top of the timesheet or your HR staff looking at the wrong column, pen-and-paper or event spreadsheets are prone to errors. 

On top of the risk of incorrect data entry, processing pen-and-paper timesheets is also time-consuming and tiring. The monotony of the task combined with the need to meet deadlines can cause staff to make mistakes.

Our Time and Attendance tools allow workers to clock in and out on the Humanforce mobile app, meaning you have an accurate record of shift times and durations. There’s no need to input the data into your payroll system since it is all integrated. The hours worked – and the pay due – can be calculated with the click of a button.

Mistake #5: Processing Payroll Late

Late payroll frustrates employees and can result in fines. In fact, in the FWO’s March 2020 audit, 30% of non-compliant businesses paid their staff correctly but failed to keep good records or issue correct and timely payslips.

Interestingly late payroll is often not caused by the actual payroll system.  It’s often the data that feeds the system that causes the delay. So it’s really important that your feeds into your payroll are accurate and compliant.  Humanforce integrates into 100+ payroll systems so you never have to manage frustrated staff or worry about compliance.

Mistake #6: Using Inadequate Payroll Technology

Manual payroll feeds can leave your organisation vulnerable to incorrect calculations and human error. What’s more, it is time-consuming and inefficient. It leaves HR and finance staff unable to work on more important tasks, such as improving efficiency, reducing hidden costs and increasing employee engagement. 

An integrated workforce management and payroll system can be the solution where you get best-of-breed of both systems.  Whether it’s an outdated program or a one-size-fits-all accounting package, the wrong technology can cause a myriad of non-compliance issues.   

Humanforce’s modern workforce management system uses the latest technology to track modern awards, automates payroll feeds correctly and ensures accurate record keeping. In doing so, it can help you reduce the risk of compliance errors and make payroll a stress-free experience for your team.

Get in touch today to find out more. We’ll be happy to set up a free, personalised demo, based on your organisation’s specific needs.