Underpayment issues have been heavily documented lately in all forms of Australian media. PwC estimated underpayment of employee entitlements in Australia at $1.35 billion per year! What businesses do not disclose, and potentially are not focussing on, is the overpayment of workers. 

For an organisation, not focussing on interrogating your total salary and wages costs through compliant payroll and time capture systems, is simply watching ‘money go out the door’.

Here are a few tips on ways to identify payroll overpayments:

  1. Don’t rely on employee self-reporting – in any organisation, underpayment issues are likely to be raised direct by the employee with the HR or Payroll team. But it’s also fair to say that it’s unlikely that employees will notice an overpayment, as it may not be as obvious.
  2. Utilise your normal pay run process – combine the use of a payroll pre-payment report, and a pre-determined total salary and wage cost threshold, (either a percentage or dollar amount) to identify if there is a variance per pay process.
  3. Policy and procedures – firstly ask yourself if you have policies and procedures for your payroll. If you do, that’s a good start. However, these are not ‘set and forget’ documents. Continue to ask yourself additional questions such as: are they being used; how frequently are they reviewed and by whom; have you allocated an individual to own the processes, procedures and documentation?
  4. Annual flash audit – put in place independent internal and/or external annual flash audits. An audit should include a review of processes and procedures and include a robust sample of new hires, leavers and any employee changes where there has been a financial impact. IMPORTANT NOTE: There should be a clear separation of duties between the auditor and the payroll owner.
  5. Understand the difference between consultants and auditors – engage the right team to support your business. A Workplace Law consultant will ask to see each of your awards and/or agreements and work through all the components to confirm if employees are paid correctly. Auditors will not look at how you have interpreted and applied an award/agreement.

As Australia’s biggest payroll provider, we have the experience and the technology to help ensure your business has the tools to manage overpayments. The Australian Industrial Relations environment is continually changing. These five tips will help you embed a culture of continuous review, management and improvement.

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