Australian employment law is complex, broad, and subject to ongoing updates. If you’re planning to launch a new business, it’s essential to familiarise yourself with your obligations. Identifying your employee pay risks is an entry point to understanding your overall legal obligations as an employer, and understanding these risks help you take effective measures to mitigate these risks.
This can set the foundation for a successful business launch. So what are the pay risks you should be planning for, even before you launch?
1. Underpayments
You need to pay your employees at least the minimum wage, any allowances, and other benefits as specified by the relevant regulations or industrial instruments. This may be the Fair Work Act, a relevant Modern Award, an Enterprise Agreement, an Individual Flexibility Agreements, or an Employment Contract.
Most employees in Australia are covered by an award, which sets out minimum pay rates based on the type of work and the industry. Underpayments can happen if you pay your workers less than the applicable minimum rate or pay them for fewer hours than they worked.
Underpayments can lead to serious penalties for your business and necessitate costly litigation. In some states, serious breaches are a criminal offence and can lead to terms of imprisonment. Beyond the legal ramifications, you’re also possibly exposing your business to reputational damage.
Finally, it’s worth noting that new payment solutions like on-demand payments by third-party vendors can further complicate pay calculations. They can make it even more important to verify pay calculations for accuracy.
2. Incorrect classification of employees
Your business is obligated to make sure your employees are classified correctly, including for their correct award classifications and corresponding pay grades. Examples can include classifying a part-time employee as a casual employee or applying the incorrect pay-grade level under the applicable industrial instrument.
The wrong classification can also happen if an employee is initially classified correctly and their role changes over time. In this case, a more appropriate, relevant award can apply as their role changes. Other considerations, like changing total hours of work per week, can also impact classification and pay. For example, under the Clerks - Private Sector Award, overtime rates (and other terms and rates) differ for full-time and part-time employees versus casual employees.
3. Failure to keep up with pay increases
Your business is required to keep pace with wage and pay rate increases, which can be another source of underpayment risk. The minimum wage and rates of pay as set out in the Modern Awards typically increase every year. Similarly, changes to the Superannuation Guarantee percentage is another increase you’ll need to plan for. Ensure you’re keeping track of these and updating your payroll processes accordingly, so your team receives the right pay amounts.
4. Poor recordkeeping
You’ll be obligated to keep and maintain wages and time records for seven years. These include the employee’s classification (e.g., part-time), pay rates, gross and net amounts paid, and any incentive-based payments. Details of hours of work, penalty rates paid, overtime, super, and leave need to be included. Failure to keep these records can lead to serious penalties as well as reputational damage for your business.
5. Payslip obligations
You’ll need to give each employee a payslip with all required information within one working day of payday, whether by electronic means or hard copy. Details like pay period, gross and net pay, hourly rate where applicable, any loadings, super, and deductions should be included. Fines and penalties can apply if you don’t provide employees with payslips with the right information on them.
6. Overpayments
Overpayments are not a compliance issue, but you could be exposed to certain risks if you voluntarily overpay your employees beyond market average salaries. Overpayment also happens when you’re paying more than what the employee’s contributions, skills, and experience might support. First, overpaying means you’re diverting funds that could be reinvested back into the company and so eroding your bottom line.
Second, an overpaid employee who’s unhappy might continue staying in their job, and this could affect their performance over the long term. Eventually, this can result in termination for falling below performance expectations. You could be setting the employee up to fail and they likely won’t be able to find another suitable role at the same pay. For these reasons, it’s best to pay employees a competitive market rate reflecting their skills, experience, and contribution.
7. Pay transparency
Disclosing employee salaries has long been suggested as a possible remedy for the gender pay gap and discriminatory pay based on race and disability. People have also argued it can boost productivity by spurring competition. Studies show people are more productive when they know how much their peers earn as they’re not overestimating what others are paid and feeling dissatisfied.
However, a policy of pay transparency in your business could heighten the risk of workplace conflict when employees feel disadvantaged because they know certain colleagues are paid more than they are. It could lead to breaches of confidential employee data and privacy law. If you’re intending to make salaries public in your organisation, you might also be opening up your business to public scrutiny and unwanted coverage, which could lead to reputational damage.
Conclusion
The complexity of employment regulations means all businesses should plan proactively to guarantee their workforce is paid correctly. Sometimes underpayments are due to simple errors or lack of vigilance when it comes to regulatory changes. Knowing which regulations, awards, and industrial instruments apply to your employees is essential.
Clarify exactly what your employees are due to be paid and work with advisors if necessary to set up a payroll function, in-house or outsourced, that ensures ongoing compliance with any changes. Review and audit your processes and records regularly so you know you’re fully compliant. This way, you can focus on your main business activities without exposing your new business to underpayment and other employee-pay risks.
An effective way of managing employees is by using the best employee payroll management system that is offered by Msquare.
This management system provided by the company by using the software will provide the services to the employees 24*7 and help in managing the payroll information.best payroll system for small business
In addition, entrepreneurs may have trouble having all the payroll software on-hand to complete payroll tasks accurately and compliantly.
Therefore, many business owners have come to prefer the expertise of payroll outsourcing companies.Check out a few reasons why payroll outsourcing and software could help your business enjoy error-free, secure and compliant payroll processing.Save Time and MoneyNo matter how many employees a business has, processing payroll requires a lot of time, as well as tremendous attention to detail.
You can also save the time spent on determining tax obligations, creating payroll reports and handling in-house payroll management.Outsourcing companies can provide you with access to payroll software to automate mundane tasks, such as clocking attendance or making salary deposits, thus saving your time and resources.Provide Accurate Financial ReportsPayroll outsourcing companies can offer weekly, monthly or yearly reports, such as earning statements, timesheets, payroll tax reports and monthly expenses for in-house and accounting purposes.The payroll software they use can help businesses automate the data collection and tax declaration processes.
Your outsourcing team calculates, verifies and processes payroll amounts electronically, thus keeping the information organized and easily accessible.Maintain Compliance with Government PoliciesOutsourced payroll consultants stay up to date on the changing rules and regulations that govern payroll, benefits and taxes for all geographic locations.
In addition, payroll companies can offer services to calculate and file state and federal payroll taxes for your business.Increase Data Security Using the Latest TechnologyThere are several risks involved in managing payroll in-house that can lead to information theft, such as tampering with company files, a security breach of in-house payroll software and security flaws in the server or the network where you keep your data.
They also provide you with compliant, secure payroll software for employee self-service.Grant Access to 24/7 Customer ServicePayroll outsourcing companies can provide you with access to a 24/7 customer service team.
According to a report, the major reason people drain their savings is due to unforeseen medical emergencies.Therefore, one way of showing them how valuable they are to you is by covering for their healthcare needs.You can do so by providing health insurance.
If you are still wondering how health insurance can affect the finance of your employees; here are some points that can enlighten you.
The medical costs have increased significantly in the past couple of years, and are bound to keep rising.
Changing lifestyleMedical emergencies can occur at any stage of our life.
The main reason for the increase in health issues is the changing lifestyle.
This changing lifestyle requires the employees to be prepared financially; regardless of its magnitude.
Payroll is the process that companies use to pay their employees by tracking the number of hours they have worked and all other elements that would define the remuneration.https://www.3equals.in/payroll-management/
Payroll services is an activity that is performed by an organization with laborers.
It’s the system the organization experiences to pay the laborers.
The term payroll has two or three obvious parts: The estimation and task of checks (manual & automatic) to workers every payday.
The budgetary records for laborers wages and pay rates, holding, considerations, rewards, pay for time not worked (occasions, get-aways, got out time, and so forth.
), and different things on employees checks
