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Wage theft and underpayments are not the same.

Updated: Jan 7

Wage theft and underpayments are not the same.

The term wage theft is sensationalistic and is a great headline grabber but does not satisfactorily describe the problem. Wage fraud is a fitting phrase for the deliberate acts of some employers to deny or withhold pay and entitlements, including superannuation.

The majority of underpayments are not wage theft.

The blanket use of wage theft creates a distorted perspective and does not effectively communicate the real issues. The implication is that underpayments are a criminal act irrespective of the reason. Whilst wage theft presumably does occur, the percentage of cases is relatively low.

Both overpayments and underpayments are common in payroll for many reasons and are not wage theft.

Often the root causes are:

  • Incorrectly configured systems used in the end-to-end payroll process.

  • Misinterpretation or a misunderstanding of the relevant industrial instruments.

  • Managers and supervisors who fail to notify payroll in time.

  • Untrained and unqualified people are processing payroll.

On many occasions, systems are "set and forget", resulting in neglect.

I usually use the analogy that a tradesperson is only as good as their tools; if the tools don't perform as needed, the outcomes will not be as expected. If the systems used to process payroll (end-to-end) don't fulfil the requirements, then underpayments (and overpayments) are a natural result. Some systems have limited functionality and do not allow for complex configurations, resulting in incorrect calculations.

Payroll compliance is not something that magically happens when using software (no matter what your vendors' marketing speak states).

Driving safely from A to B requires a tuned vehicle, constant maintenance, and a trained, licensed driver.

Employers must understand myriad legislative requirements, the most complex of which is Fair Work.

The complexity of Awards causes grief for even the most skilled. In most cases, the employer makes their best effort to pay correctly but fails to navigate the never-ending changes and struggles to understand the poorly worded and confusing jargon.

There is often a lack of consistency and meaning with the various terms and terminology between one Award and another. Also, there is confusion and also a lack of consistency among regulators. An Allowance with Fair Work has a different definition than the ATO.

In my experience, anybody can state they are a Payroll Professional or SME, but what do you look for that assures the claim?

Many questions remain unanswered with payroll processing.

  • What are the characteristics of a Payroll Professional?

  • What is the scope of knowledge required?

  • What qualifications are needed (and available)?

  • Are there accredited University Certificates\Degrees\Diplomas available (vendor agnostic)?

  • What options are available for ongoing training, allowing the Payroll Professional to remain updated in a continuously changing environment?

  • Who is responsible for governance?

Numerous industry participants serve various facets, but currently, there is not one "umbrella" organisation providing registration, governance, and ongoing accreditation for payroll, which is fundamental. Presently, it's a bit of the "wild west" wherein no formal arrangements ensure the integrity and knowledge of those involved in payroll, including individuals who process, develop, consult, support and provide training. There is a long way to go on the journey, but Single Touch Payroll was the trigger for change and is now the driver for improvement.

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