Accurately paying your employees is a fundamental basic of running a business, but it is one that companies consistently get wrong.
Rippling recently conducted independent research on the condition of Australian payroll, revealing the majority (59%) of Australian businesses admitted to making a payroll error within the past 24 months. The most common oversight was accidental wage theft, with 48% of payroll errors resulting from underpaying or overpaying an employee, and 44% from payment delays.
Inaccurate remuneration not only undermines employee trust by indicating an undervaluation of contributions, but it also leads to a decline in morale, satisfaction and engagement among employees.
IR reforms are also exacerbating the problem by criminalising wage theft and intensifying the consequences for those who fail to comply. This is bringing a new level of scrutiny for organisations, and signals a significant compliance risk for many. This year alone, we’ve seen many renowned household brands in Australia pay millions in fines as a result of getting payroll wrong.
The cost of accidental wage theft has never been higher, so how can organisations ensure they reduce the risk of payroll errors occurring and remain compliant?
The payroll error paradigm
A reliance on outdated and non-automated systems is contributing to the high-rate of error when processing payroll. Half (48%) of businesses are still relying on manually inputting employee data, which significantly increases the risk of human error taking place and is a particular challenge for businesses as they scale.
This is then exacerbated by repeating the process across multiple siloed systems. The majority (63%) of Australian businesses use three or more solutions to handle their HR and payroll, with more than a third (37%) using at least five solutions. The risk of an error occurring is significantly increased when syndicating employee data across multiple systems, making it difficult to keep employee records consistent and opening the door to inaccurate input.
New IR reforms are set to compound the issue even more by introducing major changes to workplace laws, for example, ‘Same Job Same Pay’. These changes are broad ranging and often complex, making it extremely difficult for HR and Payroll teams to stay up to date. Our data found 52% of respondents believing IR changes will add more complexity and stress to the payroll function. It is therefore little wonder that over half (54%) are reassessing how they manage payroll due to IR reforms.
The path to compliance
If Australian companies are to better overcome these challenges, they need to streamline and modernise their legacy payroll function. Systems should aim to remove common pain points, like the length of time it takes to process payroll, keeping pace with legislation and compliance obligations, and managing increased complexity that adds administrative burden. This way they will free up HR and payroll teams time to be spent on more valuable tasks.
It is difficult for firms to maintain consistency in employee data when it is spread across disparate, siloed systems. However, if you can develop a uniform system of record, you can ensure any changes you make in one area are automatically synchronised across all connected systems. By creating a single source of truth for all employee data in one system, you can drastically minimise the margin for error and empower each team to automate processes, access key insights, and administer payroll more efficiently.
At present, just one out of every ten companies are consolidating their payroll and HR operations into a single solution, highlighting the extent of the problem. Without a shift in this trend, HR and payroll teams will continue to devote excessive resources towards multiple software solutions, resulting in a wasteful expenditure of both money and time on routine tasks that could readily be automated or eliminated.
A centralised payroll and HR system is essential for businesses looking to reduce errors and maintain compliance with legal regulations. To that end, businesses are looking for a better solution, with nearly half planning to migrate from their current HR and payroll systems within the next year.
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