No organisation can afford to mess with an employee’s pay, writes Angela Priestley, and the risks of payroll must be understood
The problems emerged with a bungled payroll
system implementation, leaving some employees
overpaid, others underpaid and a small percentage
not paid at all.
Leaving aside the negative stream of publicity the
problem system has created, Queensland Health
faces a more serious issue – that being the internal
trust and engagement of its employees.
Pay directly affects an employee’s livelihood and
it’s the one area where any kind of error can be
seen as unforgivable for an organisation.
But employers can seek to avoid such errors like
that which occurred at Queensland Health by
applying some basic processes and procedures –
while also recognising the vital function payroll
plays in their everyday operations.
The case for human error
As Jason Low, the general manager of The Association
for Payroll Specialists points out, if the payroll
personnel in an organisation do a good job, no one
rings them up and thanks them for it. “But if you make
a mistake, it ends up in the paper, the employees are
upset, and you get numerous phone calls.”
That might be true, but for good reason.
To mess with an employee’s paycheque is to
mess with their livelihood. Most of us do, after all,
depend on our scheduled payday to meet our
financial obligations and budget accordingly.
And payroll errors do not need to be as significant or large-scale and public as
that suffered by Queensland Health to seriously cause an impact. One only needs
to review the website of the Fair Work Ombudsmen to see where organisations
have been caught out for poor payroll procedures and practices – be them
deliberate or accidental – to know that it can happen to organisations of any size.
Problems may start with the fact that too often, organisations understate the
importance of the payroll function and consequently the essential part their payroll
personnel play in maintaining operations.
Low says a common mistake is looking at payroll like a data entry job, and
thinking a payroll system will “work its magic” simply by punching in the
“There are mistakes that happen on a day-to-day basis in the pay office,”
says Low. “Sometimes it’s ignorance of the laws and regulations, other times it’s
as simple as a data entry error, or information not being given to the payroll
person in a timely manner.”
Low highlights the extensive amount of preparation required to ensure a
payroll system is operating effectively and that employee information is
accurate. He also points out that payroll personnel must understand the laws
governing pay in order to answer questions as they arise. “If an employee
comes and asks their payroll person or their employer ‘why did you tax me like
this’, you can’t say ‘well I don’t know, that’s the way the system did it’, you need
to be able to explain it,” says Low.
Training will help, adds Low, while any information available to keep a payroll
officer up-to-date on changing laws and procedures will also assist. Low
recommends that once payroll personnel are well trained on the payroll systems
they are working with that organisations ensure they then have at least a day or
two a year to gain insight on changes that may affect the employees they’re
No system is perfect
Payroll risks do not end with payroll personnel. In fact,
it’s often the payroll system and its implementation that
can carry the most risk for an organisation.
Such is the case with Queensland Health, which
is suffering at the hands of a failed payroll system
implementation that could not meet the complex
needs of the diverse organisation – especially the
organisation’s vast array of employees under
According to payroll consultant, Nick Forrester,
the major risks associated with a new payroll system
start with their implementation and the potential for
an overrun of costs given that many suppliers will
quote based on a “nothing going wrong” mentality.
He cites a study from Forester Research that
found that the implementation of an all-in-one
payroll system can often be as high as 20 times the
original cost of the software.
A good way to avoid such an overrun in costs,
says Forrester, is to ensure that payroll personnel
are included in the software selection and
implementation process. “If they are an active part
of deciding which system to select, then they will
inevitably be onside and will battle through rain,
hail or shine to have a successful system,” he says.
“If on the other hand, as I’ve also seen on many
occasions, management – be it HR, finance or
somebody else – goes through the process without
proper consultation and without involving payroll
people in the acquisition process, then it ends up
being ‘they got this system, they can suffer’.”
Organisations must also do their research and
determine if they require an adaptable all-in-one
payroll/finance system (like SAP, PeopleSoft,
Oracle) or specific off-the-shelf payroll solutions.
But for many organisations, payroll specific off-
the-shelf solutions will provide the bells and whistles
payroll personnel need. “The top-tier systems [the all-
in-one solutions] emphasise their selling on the basis
that it’s a complete system,” says Forrester. “The
reality is the payroll system doesn’t need to be
integrated with financials. It doesn’t talk to financials
until payday, which is once a fortnight or once a
month – and you can run an interface easily.”
Meeting the risks of payroll means responding to
the needs of payroll personnel and giving careful
consideration to the systems they use. It also helps to
remember that such systems and personnel play a
vital role in keeping the economy moving.
“If every payroll person in Australia went on
strike for two weeks, the country would completely
come to a stop,” says Low. “The whole country
revolves on taxes being collected, people being
paid. It’s an important job, but one that’s not visible
As for Queensland Health, the process has
become a little too visible and the organisation’s
employees continue to face pay issues as their
payroll system is rebuilt.