How can employers minimise the incidence of payroll errors?

CEOs and CFOs are less likely to be privy to these mistakes in larger organisations

How can employers minimise the incidence of payroll errors?

New research has revealed that 1 in 3 Australian organisations admit to making employee payment mistakes every pay run - and the CEO and CFO never know about it.

Moreover, across 45% of organisations it’s the employees who alert managers to the errors.

The Australian Payroll Association surveyed 601 payroll managers from big and small businesses, and across myriad industries.

The research found that 33% of payroll managers admit to making employee payment or entitlement blunders at least once a month, and a further 21% admitted to making mistakes every quarter.

And across 45% of these organisations it’s the employees who are the first to alert the organisation about the mistake. In 32% of these organisations, the CEO, CFO or equivalent are not told about the payment errors.

With more companies facing employee underpayment scandals it has become crucial for organisations to minimise the incidence of payroll errors, according to the Australian Payroll Association CEO Tracy Angwin.

“Accurate pay and entitlements involve making not only the correct pay and award calculations, but accurate leave entitlements and superannuation contributions within the correct timeframe,” said Angwin.

“When payment mistakes occur, companies need to be transparent not only with the employee but with their superiors so that the errors can be corrected, and steps taken to avoid them in the future.”

The survey also revealed that the bigger the organisation, the higher the rate of mistakes across employee pay and entitlements.

Sixty-nine per cent of organisations with more than 10,000 employees made errors at least every month, compared with 55% of organisations with 1001-5000 employees, 45% of organisations with 500-1000 employees, 24% of those with 201-500 employees, 21% of those with 51-200 employees, and just 16% of businesses with up to 50 employees.

CEOs and CFOs are less likely to be privy to these mistakes in larger organisations.

In 49% of companies with more than 1000 employees, CEOs and CFOs are not told about employee payment errors. In companies with 200 or fewer employees, just 18% of CEOs, CFOs or the equivalent are not told about the errors.

READ MORE: HR nightmare: Employee releases payroll info

Smaller companies had a higher incidence of late payments and delayed superannuation contributions.

Furthermore, one in five (20%) of micro-businesses (1-10 employees) made late salary payments compared with just 11% of large organisations with more than 1000 employees.

Twenty-two per cent of micro-businesses also admitted to paying superannuation contributions late compared with just 3% of organisations with more than 1000 employees.

Organisations in the healthcare, social assistance and disability services industries had the highest rate of employee payment errors, at 43%, compared with other industries. This sector also had the highest rate of late payments, at 12%.

READ MORE: Pizza Hut responds to underpayment allegations

Additionally, 18% of financial services organisations admitted to making late superannuation contributions – higher than in any other industry.

“While our data found that most of these payment inaccuracies were discovered by payroll personnel a large portion were only alerted to these errors when the affected employee flagged it as an issue,” added Angwin.

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