By Adrienne Silla | Head of Advisory, Australian Payroll Association
When a payroll error is discovered, the payroll department is often the first place people look. After all, payroll is responsible for calculating employees' pay, processing leave and making sure payments are correct.
But what if the error didn't actually start in payroll?
In our experience, many payroll issues begin well before information reaches the payroll team. They can originate during recruitment and onboarding, when employment contracts are prepared, or when managers create rosters and make decisions about working hours. By the time payroll receives the information, the problem may already be built into the employee's employment arrangements or working pattern.
This is why payroll compliance cannot sit solely with the payroll department. It requires people across the business to understand how their decisions affect employee entitlements.
Think about the number of people involved in an employee's journey through an organisation. Recruitment prepares employment offers, HR manages contracts and changes to employment conditions, operational managers determine working arrangements and rosters, and payroll processes the information it receives. Each of these areas has a role to play in getting payroll right.
For example, someone preparing an employment contract needs to understand the relevant Award or Enterprise Agreement. It is not enough to know the employee's job title, salary and contracted hours. They also need to understand the applicable classification, ordinary hours, span of hours and any conditions that affect how those hours can be worked.
Similarly, a manager preparing a roster needs to understand the industrial instrument that applies to their employees. A roster that looks operationally convenient may not comply with the Award or Agreement, and it could create unexpected pay consequences. If the person preparing the roster does not understand the rules, payroll may be left trying to correct an arrangement that should never have been created in the first place.
One example we regularly see involves full-time employees working outside the span of ordinary hours specified in their Award.
An employee may be contracted to work 38 ordinary hours per week, but the roster is prepared without considering the Award's permitted span of ordinary hours or the conditions that apply when work is performed outside that span. The business may believe it has rostered the employee for their full-time hours. However, depending on the applicable Award provisions, some of those hours may not be treated as ordinary hours and may attract overtime. This can create a situation where the employee is not receiving the 38 ordinary hours they were contracted to work, missing superannuation contributions or leave entitlements.
Modern Awards and Enterprise Agreements can be complex. Understanding how to interpret a clause and apply it in practice is a specialist skill, but that knowledge should not be limited to payroll professionals. Different business areas need different levels of payroll knowledge depending on their responsibilities.
For example:
This does not mean every manager needs to become a payroll expert. It means the people making decisions that affect pay need enough knowledge to recognise when something requires further advice.
One of the most frustrating aspects of payroll remediation is discovering that an issue could have been avoided with the right knowledge at the beginning.
A contract is prepared with the wrong classification. A roster is created outside the permitted span of ordinary hours. An employee's working arrangements change, but nobody considers the impact on their Award entitlements. These decisions can continue for months or even years before someone identifies the problem. By then, the business may be facing historical underpayments, superannuation liabilities, employee queries, remediation costs and the time involved in investigating what happened.
It is much easier to get the arrangement right when an employee is first engaged or when their working arrangements change than to correct several years of payroll history.
This is where targeted payroll training can make a real difference. Rather than providing generic payroll training to everyone, organisations should consider what knowledge their different teams need to make informed decisions.
At Australian Payroll Association, we can develop bespoke training for businesses based on their workforce, applicable Awards and Enterprise Agreements, payroll processes and operational requirements.
For example, we can help HR teams understand the payroll implications of employment contracts and classifications or provide practical training for managers who are responsible for rostering employees. Training can focus on the actual industrial instruments and scenarios relevant to the organisation, making it easier for employees to apply what they learn in their day-to-day roles.
The objective is to build payroll awareness across the business; reduce preventable errors and make sure the right information reaches payroll in the first place.
Your payroll team can be experienced, your payroll system can be configured correctly and your processes can be well documented. But if the information entering payroll is wrong, the result can still be wrong. Payroll compliance starts long before the pay run. It starts when an employee is recruited, when their contract is prepared, when their classification is determined and when their working hours are rostered.
Getting payroll right is not just the responsibility of the people who process the pay. It is the responsibility of everyone whose decisions affect it.
If your organisation wants to strengthen payroll knowledge beyond the payroll department, contact APA about bespoke training designed around your business, your workforce and your industrial obligations.