‘Systemic issue’ with underpayments highlighted by ANU payroll errors

Revelations that the Australian National University underpaid staff by an estimated $2 million are demonstrative of the need for universities to address gaps in their payroll systems.

Editor’s note: This story first appeared on Lawyers Weekly’s sister brand, Accounting Times.

Yellow Canary managing director Marcus Zeltzer said the news about the Australian National University underpaying its staff by approximately $2 million due to errors in timesheet processing highlights the urgent need for universities and organisations in general to review their payroll compliance.

Last week, as reported by HR Leader, the university admitted to underpaying close to 2,300 employees over a period of more than a decade, noting the missed payments were caused by unactioned timesheets submitted by casual staff that weren’t brought to the attention of the university.

The error was due to a “system configuration”, the university stressed.

“ANU has taken immediate steps to rectify the system error that caused the missed payments and ensure the error is avoided in future,” it said.

The investigation into the timesheet error identified a secondary payment issue, which may have affected up to 120 staff undertaking emergency and on-call duties. The university is still in the process of investigating the secondary matter.

The university has already paid $261,000 to some 220 staff for missed payments in the 2023–2024 financial year.

The recent underpayment issues at ANU also follow reports by NTEU, which confirm that underpayments to university staff in recent years exceed $203 million, with an additional $168 million set aside as provisions to repay workers for suspected payroll underpayments.

Zeltzer said payroll errors at universities have become a “systemic issue” that needs to be addressed by the sector.

According to Zeltzer, the root causes of these issues are well documented and debated, which include system complexity, designation of teaching work, reasonableness of performance expectations, quantum of unpaid work, and the nature of employment contracts.

“Addressing these factors is crucial, but the issue of payroll underpayment will persist unless there is a change in how payroll compliance in the tertiary sector is governed and monitored,” he said.

The payroll compliance software provider said there are important questions that university governance forums, including the council, academic boards and risk and adult sub-committees, need to be asking.

“[For example] does university management provide real-time pre-payroll release assurance over accuracy, and what processes does the university have in place to assess pay rules in employment agreements and ensure that they are being followed?” he said.

If there are no processes in place for this, then the university may need to look at implementing them, he added.

Where there are discrepancies, the university should be looking at what causes them and how quickly they can be addressed. They also need to look at whether these discrepancies are one-off occurrences or if they are systemic.

“The university’s chief people officer, as the likely organisational and reputational owner of payroll accuracy, needs to provide assurance, monitor, and track the resolution of root causes until they are addressed. This action should be reported to the council promptly,” said Zeltzer.

“The chief financial officer should analyse payroll data to determine whether provisions for accuracy issues need to be declared. Additionally, the head of internal audit must ensure that the processes for payroll accuracy and their review are effective and efficient.”

Zeltzer noted that the dynamics of the global university sector changed profoundly due to the COVID-19 pandemic.

“What hasn’t changed – across all sectors – is the principle that employees should be paid what they are entitled to, when they are entitled to it. Continuous governance and monitoring of this process remain essential,” he said.

Universities may also need to consider implementing tech-enabled solutions across the entire sector.

“By leveraging automated payroll review technology, universities can streamline the process of identifying, addressing, and preventing underpayments, ensuring fair and compliant practices in all institutions,” he said.