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A recent survey has warned that “complacency is no longer an option” for payroll departments, with wage theft now a criminal offence.
Editor’s note: This story first appeared on HR Leader’s sister brand, Accounting Times.
Most businesses are struggling with payroll compliance, and around one in five suspect underpayments, according to a recent Yellow Canary report.
The report said 93 per cent of businesses with 50 or more employees had payroll concerns, such as understanding legislation, internal communication, and their resources to undertake audits.
The findings come as tough new laws came into effect this month, allowing bosses to be jailed for 10 years and fined millions for deliberate wage theft.
Managing director Marcus Zeltzer said the new regime meant “complacency is no longer an option” for businesses.
“The introduction of the Closing Loopholes Act, including the criminalisation of wage theft, marks a pivotal moment for Australian businesses,” he said.
“I encourage every business leader to view this report as a call to action.”
“Now is the time to prioritise payroll compliance, equip your teams with the right tools, and foster a culture where compliance is seen as a shared responsibility across your organisation.”
The survey found that 93 per cent of businesses with 50 or more employees had an “area of concern” regarding potential underpayments.
It said 39 per cent of respondents reported concerns with keeping up to date with legislation and obligations, “underscoring the complexity of maintaining compliance in a rapidly evolving regulatory environment”.
Other concerns included a lack of internal communication (37 per cent), time and resource constraints for audits (32 per cent), reliability of payroll software (31 per cent) and aligning rostering and attendance processes (31 per cent).
Additionally, nearly one in five (17 per cent) businesses were uncertain about whether they were paying employees correctly, while 19 per cent suspected underpayments, but had not confirmed it.
Non-profits were also twice as likely as for-profit organisations to suspect payroll underpayment issues, it said.
“NFPs are particularly vulnerable, with 32 per cent suspecting underpayment issues, double the rate of for-profit organisations (16 per cent),” the report said.
“This may be due to the financial constraints that limit their ability to ensure payroll accuracy, paired with complexities of the SCHADS award, commonly used by NFP businesses.”
The average annual budget allocated to payroll compliance for businesses with 50 or more employees was just over half a million dollars, peaking among businesses with over 5,000 employees ($808,226) and those with 1,000–4,999 employees ($743,015).
Smaller organisations allocated comparatively lower budgets, with businesses employing 50–199 staff averaging $384,727 and those with 200–999 employees budgeting $442,599.
Zeltzer added that a significant number of businesses were still relying on “flawed manual processes or have not conducted thorough reviews”.
The most common ways for businesses to conduct payroll reviews and audits were using auditing software (56 per cent) or a third-party auditing service provider (49 per cent).
however, the report found others used “less reliable” manual methods, including spreadsheets (31 per cent), reviewing pay code configurations (32 per cent) and sampling for checks (37 per cent).
Yellow Canary said its report was based on a survey of 533 compliance leaders responsible for payroll compliance in businesses with headcounts ranging from 50 to 5,000+ employees, conducted by Lonergan Research in November 2023.
