Australia’s complex and ever-changing industrial relations landscape means that, even with the best of intentions, underpayment of wages to employees is common. We hear terms like ‘wage theft’ bandied around constantly, however it’s worth remembering that most of the time these compliance breaches are accidental.
Whilst ignorance of the law may sometimes be a mitigating factor, payroll mistakes can be costly, with massive fines, and even jail time, a possibility in some states. The impact of reputational damage on business, staff retention and recruitment should also not be underestimated.
What is payroll compliance?
Payroll Compliance encompasses everything from reporting to government agencies (PAYGW, TFN Declaration, STP, wage-garnishing, super payments) to ensuring that Enterprise Agreement conditions do not fall below the National Employment Standards. Payroll compliance in Australia spans accounting, law, human resources, and all levels of management, and it takes expertise to identify areas of risk or a lack of governance in a payroll system.
There are several levels of legislation, and sometimes conflicts arise. In 2021, for example, there were a few months when the National Minimum Wage was higher than the lowest award wage, so it’s important to notice when these discrepancies occur and act quickly. A good bookkeeper or payroll specialist will let you know and will follow up with the relevant bodies - like The Fair Work Ombudsman - to ensure compliance.
The NES
All employees in the National Workplace Relations System are covered by the National Employment Standards. The NES are 11 minimum entitlements that cover an employee’s maximum hours, leave entitlements, termination, resignation, redundancy, flexible working arrangements, and changing from casual to permanent employment. It also mandates the provision of the Fair Work Information Statement (the FWIS) and Casual Employment Information Statement (the CEIS).
The NES conditions are national minimum conditions so no employer, contract or Enterprise Agreement can apply conditions that are lower than those provided for in the NES.
State or Territory rules
Depending on where your business resides or the worker is employed, public holidays and Long Service Leave might be different, for instance, and this would affect termination payments, amongst other things. Similarly, Workers' Compensation Insurance is governed by individual states and territories, so concepts like "deemed workers" should be carefully reviewed according to your state's regulator.
Awards and Enterprise Agreements
Determining which Enterprise Agreement or awards apply to workers in your business is essential to paying employees their correct entitlements. Not everyone in a business will necessarily be on the same award either. For example, an Office Manager in a construction business would likely not be covered by the Building and Construction General On-site Award.
Not every role will be covered by a Modern Award or EA, and in these circumstances the employees are considered to be award and agreement free, so the National Minimum Wage and the NES will form the minimum terms and conditions of employment.
Workers' Compensation Insurance
This is arguably the most overlooked obligation amongst sole traders or small businesses that only employ a couple of staff, particularly if it's just a couple of guys answering phones in an air-conditioned office. What could go wrong? The chief risk in this instance is actually getting a $55,000 fine and/or six months' imprisonment if you're in NSW and you don't have insurance...
Almost every business in Australia that employs one or more persons must have Workers' Insurance, however there are exceptions based on very low annual wages, but other criteria may also affect an exemption. For NSW here's a link for exempt businesses, however I've posted more links down below.
Now I know you weren’t going to do this on a spreadsheet, hey?
Nowadays there are any number of accounting cloud systems, like Xero, that include payroll modules, and many of them also keep track of legislative changes, award wage changes and other compliance issues. And there are SaaS providers who furnish more specialised systems that can integrate with your accounts software, like KeyPay, QuickBooks Time, or Employment Hero.
Selecting the right combination will facilitate compliance and make all the different payroll and HR elements function seamlessly. Here is a brief list of criteria I would think about when selecting such systems:
What functions are essential for my business and what features are desirable? The main application that you choose has to be the one that handles your bookkeeping and accounting best, and that ticks the most boxes on your list of essential features.
If you are working with old MYOB files on your desktop, then you should certainly consider moving to a cloud system for security, versatility, online bank feeds and peace of mind.
When selecting new applications, I always Google the number of active users over time and how long the software has been around. If the company has only been running a year or so and the number of users is stagnant, then there’s a risk that the company will disappear or discontinue support for the app. This is hugely time-wasting and costly. Choosing established companies is usually a better option as it generally takes 2 to 4 years to refine the UX and de-bug the software.
Check reviews online, but also check the company’s own help centre, for ‘sticky’ customer issues. If they are unresponsive or some features are clunky despite the software running a long time, it might disqualify them from your shortlist.
How many applications are available that integrate with your candidate? These days, if partners aren’t building apps that integrate with your candidate app then it’s a red flag. Here are some links to integration pages with a thriving ecosystem of useful integrations: Xero App Store | Wix App Market | ServiceM8 Integrations
What are the limits to scalability of my candidate app? If you envision having more than 200 staff and contractors, then Xero may not be for you. That said, Xero integrates seamlessly with KeyPay, one of the best available payroll systems for compliance, so that would overcome such a limitation. See how that works?
You may wish to reach out to a payroll specialist for assistance at any time during the selection process to trouble-shoot and test functionality.
Once you have a shortlist of 2 or 3 candidate apps you should run them alongside your current apps with as much data as possible to see how they perform in the real world. Never swap over without backups, fallbacks and plenty of technical support on hand.
Why haven't I mentioned cost? Because all the good software-as-a-service providers offer scalability, so you will pay more only when you need more...
I hope these notes help, but please don’t hesitate to reach out for specific help or advice!
Tools and resources
Workers' compensation regulator in each state or territory:
Australian Capital Territory: WorkSafe ACT
New South Wales: State Insurance Regulatory Authority (NSW)
Northern Territory: NT WorkSafe
Norfolk Island: Norfolk Island Workers Compensation Agency
Queensland: WorkCover Queensland
South Australia: ReturnToWork SA
Tasmania: WorkCover Tasmania
Victoria: WorkSafe Victoria
Western Australia: WorkCover WA
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