Payroll errors costing employees billions in lost income

26 November 2020 Consultancy.com.au 2 min. read

As it stands, a quarter of employees in Australia are underpaid. New analysis from human capital solutions firm Humanforce explains how this is a case of negligence more than mal-intent.

With the current rate of rampant underpayment, Humanforce reports that workers in Australia lose well over $2 billion in wages every year. Shift workers – those outside the traditional 9 to 5 model – are the biggest victims here, owing to changeable working hours and a complex legal compensation structure.

According to Humanforce founder and managing director Bruce Mackenzie, this makes underpayment a problem despite the best of intentions. “The legal traps, jargon and regulatory red tape in Australian employment law means that most employers don’t know the ins and outs of award rates obligations and the technicalities that come with them,” he said to platform Human Resources Director.

Payroll errors costing employees billions in lost income

“And those that suffer are shift workers and their families as a consequence.” For Mackenzie, the issue is systemic, which is why it has been a reality for a long time and will likely persist in the future. The Covid-19 crisis will bring its own share of changes to workforce structure, which might make matters worse.

With millions losing their jobs as a result of the pandemic’s economic fallout, underpayment among those who are employed could prove devastating for the country’s economy. No doubt, the onus is on the government to simplify the legal structure over time. In the near term, however, it is up to businesses to ensure fair pay. 

In a report last year, Big Four accounting and advisory firm PwC also noted Australia’s underpayment problem, pegging the issue on three factors. Of course, the complexity of the legal framework is one, as is “the declining presence of unions as a source of oversight within the workplace,” according to the firm.

That being said, PwC underlined that legal complexity and lack of oversight cannot be used as an excuse for underpaying employees. The bottom line is that Australian businesses simply don’t invest enough in payrolling systems and processes that could help navigate this complex environment and help employees.

Technology has a growing role to play here. Digital payrolling systems can leverage artificial intelligence and data analytics, among other Industry 4.0 technologies, to calculate pay levels in line with the legal framework and the hours worked. Mackenzie’s Humanforce offers a number of such solutions, although for him the need of the hour is simply a “robust framework for ensuring that Australian workers can be paid correctly and on time.”

“It’s time to shift up a gear, simplify the process, ensure everyday Australians get paid what they deserve and help local Aussie businesses stay ahead of the curve,” he said.