Vaughan S.
Vaughan Stemmett

There has been an increase in entities across Australia facing payroll and remuneration compliance issues. Some have resulted in material underpayments to staff.

Continued assessment of the payroll control environment and putting steps in place to improve existing processes and systems will help to manage the risk of non-compliance. Entities in Queensland and in the public sector have been taking a proactive approach to check payments of salary, allowances, superannuation, pay as you go (PAYG), and voluntary or mandated deductions. The risk of compliance issues increases where there are complex employee arrangements, including:

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  • Lack of awareness from employers of how modern awards and other industrial instruments apply to their employees
  • Lack of knowledge regarding applicable industrial instruments
  • Incorrect classification of instrument-covered employees
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  • Misapplying complex rules from awards and enterprise bargaining agreements
  • Reliance on annualised salaries, which may not be sufficient to offset what would have been paid if discrete entitlements were applied
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  • Failure to accurately record hours of work, timesheet input and coding errors
  • Incorrect payroll configuration and coding, particularly relating to overtime, penalties, loading, allowances and superannuation guarantee
  • Inadequate resourcing or training of payroll staff


Management should:  

  • regularly review and update all employee information in the payroll system to ensure it agrees with updates to the employment standards, modern awards or enterprise agreements, their contracts of employment and any recent case law
  • review payroll code configuration, ensuring that changes have been coded correctly into the payroll system
  • use electronic time and attendance systems to capture non-rostered hours
  • understand and assess manual interventions that may be required by payroll staff to ensure employees are paid correctly
  • ensure that the payroll function is appropriately resourced and up to date with professional development.

Audit committees should:

  • confirm with management that they are applying the correct minimum terms and conditions of employment to employees and check to see whether legal advice should be sought
  • depending on the risk of non-compliance, assess whether an external review should be undertaken to ensure that codes and configurations are up to date 
  • confirm with management that arrangements for employees who are paid an annualised salary have been reviewed to ensure it is allowable under awards and arrangements and is appropriate
  • ask management if they have received employee complaints regarding the accuracy of payroll and understand how often back pay adjustments are made
  • understand whether governance controls and risk frameworks are sufficient.