Workforce compliance

Navigating payroll compliance in banking

Navigating payroll compliance in banking
Drew Cutler
Drew Cutler
minute read
December 5, 2022
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Employing a cool 800,000+ people, or about 6% of Australia’s working population, the Banking and Finance Industry (BFI) comprises of the following professions: 

  • Banking & General Financial Services 
  • Accounting and Bookkeeping, 
  • Financial Markets and Planning, 
  • Insurance and Superannuation, 
  • Mortgage and Financial Broking; and 
  • Specialised Financial Services. 

BFI workers touch the lives of most Australians who rely on the industry to manage their wealth and financial security. Following extensive regulatory reform, the Financial Services industry has seen some significant changes over the last decade. 

With the spotlight on the finance industry, it was not going to be long before large-scale underpayments would surface. In the last 4 years alone, some of Australia’s largest BFI employers have been accused of underpaying employees by more than $100 million! 

So, what is it that makes workforce compliance so difficult? The Banking and Finance Sector Award 2020 covers most employees engaged in work within the Banking & Finance Industry. Here we look at some of the more common complexities that industry employers should think about while considering their compliance obligations.

1. Individual Flexibility Arrangements 

It’s a ‘set-and-forget' sort of thing, right? Wrong. The BFI Award allows employers to offer employees an Individual Flexibility Arrangement, commonly referred to as an ‘IFA.’ Simply put, an IFA is an agreement made by an employee to be paid a higher rate of pay (above the minimum prescribed amount) in lieu of receiving things like overtime, allowances, penalty rates, etc. 

So, an employee has been set up with an IFA. This can be filed away with no further action needed, right? If only it was that easy! 

The overriding factor that makes an IFA tricky is that the employee must remain better off for the agreement to continue to be effective. 

The gap between the ‘above award’ payment and the hourly rate given to an employee needs to consider all the entitlements they are entitled to and update to reflect any changes in the minimum wages and entitlements. For instance, the most recent National Wage Review saw a 4.6% increase in the minimum wage across the board, including the BFI Award.  

Unfortunately, many employers simply do not have the systems or capacity to reconcile what entitlements would have been paid to an employee against what has been paid.  

2. Time and Attendance & Record Keeping 

The Fair Work Regulations set out the various minimum records an employer must keep about their employees. Is this enough? Probably not! 

Keeping track of all entitlements, including TOIL, higher duties, and other allowances, is critical to ensuring satisfactory workforce compliance. Without this data, it can be difficult to ‘recreate’ time and attendance data that will accurately recall what has happened for the purposes of ensuring employees are paid their entitlements correctly. 

3. Overtime for Part-Time Employees

Australians rank number 3 in the world for the highest participation in part-time work. The Banking and Finance Industry is certainly not immune to this statistic, with more than 20% of their workforce opting to work less than full-time hours. 

Several unique overtime rules apply to part-time employees under the BFI Award. Interestingly for workforce compliance, any part-time employee that works beyond their contracted hours in any period is entitled to receive overtime, despite those hours still falling within the ordinary hours of work. 

Many payroll systems are simply not configured and equipped to calculate entitlements that arise outside of their built-in payroll cycle, or to operate on a rolling basis. Without a system in place to do regular compliance checks, it is our experience that these entitlements are often inadvertently overlooked and not calculated at all, leading to significant underpayment issues. 

How to ensure pay compliance in the Banking and Finance industry?

Workforce compliance, if disregarded, can quickly spiral out of control. The cost of remediation, interest on unpaid wages, and superannuation can easily add to the millions. 

It is critical that employers put measures in place to ensure regular checking to ensure that their internal systems and processes cater to all different scenarios and nuances that might arise. 

At Yellow Canary, our purpose-built, reliable platform is designed to be configured to your business, and the enterprise agreements, awards, and legislation unique to your operations – including IFAs. We work with your employee data and advisory partners to provide actionable insights and intelligence through reports, analytics, and dashboards to ensure you remain compliant, always. 

* 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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