To avoid costly payroll mistakes, it’s essential to understand and apply Award legislation correctly.

Awards set minimum pay rates and conditions, including allowances, penalty rates, and loadings. Their complexity can lead to errors, and even small mistakes in interpreting these rules can add up.

Overpayments, on the other hand, generally cannot be used to offset any past underpayments to that same employee, leaving employers without recourse for recovering those funds.

To protect your business, ensure accurate interpretation and application of these complex regulations.

Why you should care about correct award interpretation

Failing to accurately interpret Award legislation isn’t just a minor mistake—it can have significant financial and reputational consequences for your business. Incorrectly paying your employees can have serious effects on your business such as:

1. Reputational damage
Businesses who underpay their employees are not viewed favourably by the public despite it being unintentional.

2. Culture shock
Your employees are likely to lose faith in you which can impact their performance and their commitment to you.

3. Financial consequences
Errors in interpreting legislation such as Awards may result in penalties from regulatory authorities, which, in some cases, can be substantial. Furthermore, if employees feel they’ve been unfairly treated or underpaid, they may lodge claims for compensation, adding further financial strain to the business.

How to prevent underpayment and overpayment errors

Avoiding pay-related errors begins with the right processes and expertise. It is important to have proper processes to calculate payroll and pay your employees.

1. Consider the applicable legislation

The first step is considering what legislation applies to each employee. This can include:

• National Employment Standards
• Awards
• Enterprise Agreements
• Employment Contracts

2. Correctly calculate the amount payable

The next step is making sure you are correctly calculating the amount your employees are entitled to.

Unfortunately, we have seen many cases where the applicable legislation has been interpreted incorrectly, which can lead to a significant over or under payment.

When transitioning to new payroll software, we recommend that a sample of payruns be checked to confirm whether the software is calculating wages in accordance with expectations.

3. Create a process for approving payroll, and follow it!

A payroll approval process is vital to ensuring your payroll is robust and reliable. This includes considering:

• Who calculates payroll?
• Who reviews the payroll calculation?
• Who approves the payment of payroll?
• Are the above roles undertaken by the same person (ideally they shouldn’t be to maintain effective anti-fraud controls)
• Is there specific documentation the payroll team needs to receive and review prior to payroll being processed (i.e. timesheets signed by the appropriate person)?

However, it is all good and well to have a robust and reliable payroll approval process but if it is not followed, issues such as wage theft or a wages overpayment issue can arise.

How can Pilot assist you?

Your advisor can also help implement systems and processes to maintain compliance, giving you peace of mind that your payroll practices are correct and efficient.

Pilot has extensive experience in:

• assisting in the process of transition to new payroll software;
• undertaking payroll reviews;
• determining the amount you have over or under-paid your employees;
• assisting in discussions with your employees regarding any issues identified; and
• designing and implementing processes to ensure the issue does not occur in the future.

For more information on how Pilot can assist you with mitigating your risk and preventing fraud, contact Jennifer Veitch, Dean Strati or your Pilot Advisor on 07 3023 1300.