The benefits of payroll audits and why your business needs one

A payroll audit is a review of what employees were paid and the overall compliance throughout the payroll audit process. Under our audit service, an independent calculation is performed of what employees should have been paid and this is then compared to what they were actually paid to identify any under-, or over-payments. Payroll processes, including the record keeping processes, are also checked, ensuring that the whole system is reviewed for any non-compliance.

Identifying underpayments

Underpayments are damaging to all involved and can be indicative of poor or ineffective employment compliance practices within a business. Routine payroll audits will assist in identifying these underpayments and errors within a business’s payroll and prevent small, cumulative underpayments from eventually turning into large ones. Fixing these underpayments up as soon as possible is critical for a business in its response, and payroll audits assist in that.

For franchisors specifically, there are Vulnerable Worker laws that require reasonable steps to be taken by the franchisor to prevent breaches of workplace laws within the franchise network, to avoid the franchisor becoming liable for franchisee breaches and underpayments.

Requiring franchisees to have payroll audits undertaken in their business is a great way to display proactivity in preventing non-compliance within a franchise network. It is also important to pick up payroll errors within a franchise network at an early stage, as large underpayments would create negative media coverage and lead to damaging impacts on the public’s perception of the brand.

If you want to read more about payroll compliance, click here to read an Expert Guide on Payroll Compliance.

Displaying a proactive approach

In the event that there are underpayments that are missed by a payroll audit, which are then found by the Fair Work Ombudsmen, having a proactive employment compliance framework within an organisation can still be very beneficial. In the prosecution of underpayments, the FWO is likely to show more leniency on businesses if they have a proactive employment compliance framework already in place.

A further benefit of taking a proactive approach to payroll compliance is that if a business is caught out, they will be able to help mitigate negative perceptions by displaying their efforts taken to try to avoid the problem happening to begin with. This can assist in easing any potential tensions between the business and employees, who may lose trust due to being underpaid.

Additionally, for some businesses that may receive negative media attention, the damage to the perception can be minimised by illustrating the efforts made to avoid this situation.

Improving record keeping

Appropriate record keeping is an important part of business administration and when done correctly, will provide plenty of benefits to a business. Payroll audits should analyse payroll and ‘time and attendance’ records, plus any other available data available, such as from HR information systems, and will therefore be able to identify any non-compliance within a business’s record keeping practices.

Where records are not kept, the employer has to disprove its obligation to pay a claimed employee entitlement. In the absence of records, this can be an extremely difficult task. Keeping records can assist in not only mediating employee issues and disputes about pay, but also tracking the business’s spend on wages, and managing employees’ various leave balances, just to name a few.

How can ER Strategies help?

Payroll audits are a core part of our service offerings here at ER Strategies and have been since we realised the many issues that businesses were having with complying with Australian employment laws. We perform literally hundreds of payroll audits every year and so far, we’ve checked over $630 million in total payroll.

If you are interested in our payroll audit services, or just want to find out a bit more, get in contact with us here, or call us on 1300 55 66 37.

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