Industry news

How large corporates can reduce payroll risk

How large corporates can reduce payroll risk
Paul McCartin
Paul McCartin
minute read
October 30, 2023

On Monday 23 October 2023, the Office of the Fair Work Ombudsman released its Annual Report for the 2022-23 financial year.

The following picture emerges:

  • According to the FWO, the Australian workforce is approximately 13.8 million people.
  • The FWO has returned a combined $1.041 billion to more than 635,000 underpaid workers in the past 2 financial years; an average of about $1.4 million every day.
  • In FY2023, the FWO recovered almost $509 million in unpaid wages and entitlements for more than 250,000 employees (compared to a similar amount the previous year of $532 million in underpaid wages and entitlements).
  • The large corporate sector continues to be an area of concern to the FWO, with recoveries of more than $220m for almost 140,000 underpaid employees for FY2023.
  • In a rather shocking statement, the FWO believes that the “frequency and seriousness of disclosures [of large corporate underpayments] show no signs of declining.”

Payroll compliance for large corporates

The FWO defines a large corporate business as an entity with gross income of more than $250 million in a financial year.

According to the FWO, the large corporate sector continues to be an area of concern. Key drivers for these underpayments continue to be “ineffective governance and a lack of investment in payroll systems, expertise and monitoring”. The FWO notes that although there have been improvements in compliance, they are still seeing significant issues, and far too many workers are being underpaid.

The FWO has noted it will “continue to investigate large corporate matters and ensure workers are back-paid and large businesses held to account, including via court action where necessary.”

The FWO’s annual report notes “the prevalence and magnitude of large corporates underpayments, including by some of Australia’s biggest employers, continued to be concerning and disappointing in the past financial year.”

Key compliance issues

In over 3 years, the FWO has investigated more than 100 large corporates and reports the key issues being:

  • Inadequate annualised salary arrangements that fail to compensate employees for minimum entitlements;
  • failure to implement enterprise agreement obligations or undertakings;
  • failure to address known issues before comprehensive organisational reviews are undertaken;
  • ineffective governance (sometimes complacency); and
  • a lack of investment in payroll systems and staff, record-keeping systems, expertise and auditing.

The FWO believes “all employers – including and especially large corporates – must place a higher priority on addressing payroll issues, enhancing workplace relations systems and governance, and engaging expertise to ensure they are paying employees all their lawful entitlements.”

What steps might a large corporate take now?

Unfortunately, based on the data provided by the FWO, it appears likely that most large corporates will have some degree of wage and entitlement underpayment due to historical ineffective payroll systems and governance issues.

Our advice is to take immediate steps to monitor wage compliance with a future focused lens. This is easily done with the right technology. It’s available now and is low cost.

Regulatory technology company Yellow Canary and its clever software and data engineers have developed a platform known as “Always On Compliance” (AOC). AOC simply plugs into time and attendance and payroll data and is easily configured (based on legal instructions) to perform a monthly review of compliance with industrial instruments (e.g. Modern Awards, Enterprise Agreements).

Any variances can be quickly rectified, and improvements to payroll systems identified and fixed. Large corporates and stakeholders can quickly get much higher degrees of comfort in relation to their go forward position on wage compliance. Some companies are even using this technology instead of investing millions into a new payroll software system - essentially running a low cost, and independent, dual payroll system.

If you’d like to know more about Always On Compliance and how it might suit your company, please don't hesitate to get in touch.

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