3 ways to avoid wage underpayment scandals

- November 18, 2019 3 MIN READ
Oliver, begging bowl

Oliver. Romulus Films/Columbia Pictures

People are the foundation of any business. When employees are performing at the top of their game, the results are outstanding – but the bedrock of that performance is trust.

When employees know they are being paid correctly, it feeds a healthy company culture founded on reliability and honesty. Compliance is key to building that trust, yet so many Australian employers are missing the mark when it comes to payroll.

Last year alone, 72% of audited businesses were non-compliant with Australian payroll laws.

Given the slew of underpayment scandals we’ve already seen this year, it’s clear this is an industry-wide problem and we’ve only hit the tip of the iceberg.

If big businesses are capable of making payroll errors in the millions, imagine the 98% of Australian businesses that are SMEs, struggling to grasp the complexities of employment law.

How then, can Australian SMEs ensure they don’t become the next underpayment scandal?


Banish the ‘set and forget’ mindset

With all of the payroll scandals that have surfaced recently, many businesses are too scared to review their payroll processes for fear of encountering a mistake.

Ignorance is not an excuse when it comes to paying employees correctly though – and regulators won’t show mercy.

With three-quarters of businesses getting payroll wrong, the problem goes beyond employers, but if you haven’t already reviewed your current payroll processes – now’s the time to do it.

Payment errors compound over time so the longer it’s left, the more expensive it becomes.

Ask the Fair Work Ombudsman for advice if you recognise an error and fix it while the discussion around payroll complexity is open.

Make it your first priority to address and update outdated payroll processes, followed by implementing a regular reviewal system.


Outsource payroll processes

No one goes into business to become an employer and of course, there’s no universal qualification required to become one. This means that many employers try to manage payroll on their own and end up getting it wrong.

Business owners don’t think twice about outsourcing their accounting or tax, but there’s a different stigma associated with payroll – there’s a misconception that it’s easy to manage, but in reality, it’s a complex system that even large corporations can struggle with.

Employment Hero CEO Ben Thompson. Photo: supplied

Investing in compliance by outsourcing payroll is a simple way to build trust and gain peace of mind.

The introduction of STP is a new issue to navigate and another potential pitfall, but compliant software providers can help businesses automate each pay event, meaning employers can rest easy knowing this is taken care of.

Australia needs to become a country where business owners can grow their teams with confidence.

We need to make employing people easier and one way to do this is by outsourcing functions like payroll to experts.


Keep digital records

Modernising payroll is not just valuable for compliance – it gives business owners the opportunity to scale by eliminating redundant and time-consuming processes, simultaneously minimising human error.

Going digital also empowers your employees to be self-sufficient. Putting them in control of requesting leave, payslips and clocking in and out of shifts allows for easier management of staff records and rewards. It all contributes to creating a culture of trust through transparency, helping businesses improve employee satisfaction and reducing turnover.

We haven’t seen the end of underpayment scandals.

A complex system and a hardline approach will surface many more of these stories.

Can Aussie businesses do better? Definitely.

Will it be easy? Doubtful.

It’s the ongoing responsibility of the Fair Work Ombudsman to educate businesses about the technology that exists to make payroll streamlined, clear and correct – but until that happens across the board, employees will continue to be impacted by underpayments.

Invest in the foundation of your business by investing in compliance; a company culture founded on trust goes hand in hand with success.


  • Ben Thompson is co-founder and CEO of people management platform Employment Hero