Payroll problems: Why this April 2023 is a ‘danger month’ for workforce compliance

Payroll problems: Why this April 2023 is a ‘danger month’ for workforce compliance
Kate Brown
Kate Brown
minute read
April 24, 2023
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Much to our confusion, we’ve somehow found ourselves nearing the end of April, and almost a third of the way through the 2023 calendar year (didn’t we just celebrate Christmas?!). With Easter holidays, Anzac Day, and a whopping five weekends to enjoy during the month of April 2023, any regular muggle would agree that this may be the most exciting month of the year. However, for those responsible for employee wages, this particular April is more likely to be a ‘danger month’ when it comes to wage compliance. In the following blog post, we’ll discuss why April 2023 may enable drivers for wage underpayments, which industries are most affected, and how employers can monitor and mitigate any potential issues. 

Paying annualised salaries vs. modern award entitlements 

Employers may decide to pay an employee a fixed salary which is higher than the minimum annual award rate the employee is entitled to. The intention for this is that this ‘surplus payment’ should cover any award entitlement – e.g. leave loading, overtime, allowances or penalties – that they should receive if paid to the award. Sounds simple enough, so what’s the issue? 

Obligations of employers paying salaries to employees who sit under a modern award 

It's a common mistaken belief that if an employer pays an annual salary that is higher than an annual award rate of pay, then the obligations under that award no longer apply. However, this is not the case, and these obligations must be considered so that the employee covered by the award is not disadvantaged under the salary arrangement. 

April 2023 is the ‘perfect storm’ for payroll underpayments 

Even those employers who are aware of their obligations when paying salary vs. the award rate could face some issues in this particular month. An ‘above award rate’ salary agreement may work out smoothly on a regular month, but when we get to a ‘unicorn’ month like this April 2023, employers may be caught out. 

Why is April 2023 so different from any other month this year? We break it down below. 

Managing overtime rates and entitlements for public holidays and weekends 

April 2023 has an unusually high number of weekends due to the month starting on a Saturday and ending on a Sunday. Throw in the 3 public holidays for most states (and the extra Easter Tuesday for TAS), and we've got the perfect storm for an underpayment risk. 

This month may be the one that tips some employers over the edge of non-compliance. Those paying employees on a fixed salary may not have accounted for the additional weekends. This could mean additional overtime that could result in an underpayment overall for the employee, plus the knock-on impacts to superannuation. 

Which industries may be at risk for underpayments? 

Industries under the annualised award arrangement provisions 

Industries whose employees fall under awards impacted by the new rules for annualised award arrangements may be at risk, including those that operate in the restaurant or hospitality sector.  

As part of the provisions for annualised wage arrangements, employers must ensure that an annualised salary does not disadvantage the employee under the applicable award. Failure to adhere to these provisions could result in fines.  

Employers with these arrangements must put a comprehensive process in place to conduct reconciliation that confirms there are no shortfalls, pay back an employee within 14 days of identifying a shortfall, and update the agreement to adhere to the legislation.  

Industries that deal with shift work 

Any employer dealing with shift work who decides to pay employees by a salary could also be at risk of underpayments this April. A few example industries at risk would be retail, manufacturing or call centres. An annual salary cannot be less than the minimum entitlements an employee is entitled to under the award or registered agreement under the National Employment Standards. 

Why should employers care about underpayments? 

Businesses are under more pressure than ever to do right by their employees. Forward thinking businesses are prioritising ESG obligations (including workforce compliance) to remain employers of choice and forcing others to catch up. No matter the employer’s intent, the consequences of non-compliance are becoming increasingly legislated. With a Federal wage theft bill coming in 2023, and state wage theft acts already imposed in Victoria and Queensland, officers and directors are facing personal liabilities for underpaying staff, such as fines or even jail time. With ongoing investigations from Fair work, ATO and state-based inspectorates, it’s vital for employers to find a solution that shows they are doing their due diligence and taking a proactive approach to compliance. 

How can employers monitor and manage wage compliance? 

Publicised underpayment claims continue to demonstrate that employers cannot rely on people or payroll products to ensure pay compliance. Even the most intelligent and knowledgeable people are at risk of human error. Combine this with outdated business processes, and you’ve got the perfect recipe for non-compliance. 

Yellow Canary’s Pay Always On Compliance makes it easy for employers to ensure workforce compliance, through automated monthly reviews. Our technology compares what was paid, to what should have been paid to employees, so employers can rapidly address and action any issues. 

Keen to find out more? Get in touch.

* Yellow Canary content on this website is intended solely for the purpose of offering commentary and general knowledge. The content is not intended to constitute legal advice. You should seek legal or other professional advice before acting or relying on any of the content.

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