1 in 3 organisations make employee payment mistakes regularly
Wed 14 August 2019 - 12:30 pmFeatured | Finance
New data from an industry association has revealed that 1 in 3 Australian organisations admit to making employee payment mistakes every pay run, and the CEO and CFO never know about it. Across 45 per cent of organisations, it’s the employees who alert managers to the errors.
The Australian Payroll Association (Australian Payroll Association) – Australia’s leading network for payroll training, consulting and advisory – surveyed 601 payroll managers across the country’s big and small businesses, and across myriad industries.
The research found that of the 33 per cent of payroll managers admit to making employee payment or entitlement blunders at least once a month, and a further 21 per cent admitted to making mistakes every quarter.
Surprisingly, across 45 per cent of these organisations, the employees are the first to alert the organisation about the mistake. In 32 per cent of these organisations, the CEO, CFO or equivalent are not told about the payment errors.
The bigger the organisation, the more mistakes made
The survey also revealed that the bigger the organisation, the higher the rate of mistakes across employee pay and entitlements. Sixty-nine (69) per cent of organisations with more than 10,000 employees made errors at least every month, compared with 55 per cent of organisations with 1001-5000 employees, 45 per cent of organisations with 500-1000 employees, 24 per cent of those with 201-500 employees, 21 per cent of those with 51-200 employees, and just 16 per cent of businesses with up to 50 employees.
CEOs and CFOs are less likely to be privy to these mistakes in larger organisations. In 49 per cent of companies with more than 1000 employees, CEOs and CFOs are not told about employee payment errors. In companies with 200 or fewer employees, just 18 per cent of CEOs, CFOs or the equivalent are not told about the errors.
On the other hand, smaller companies had a higher incidence of late payments and delayed superannuation contributions. One in five (20 per cent) of micro-businesses (1-10 employees) made late salary payments compared with just 11 per cent of large organisations with more than 1000 employees. Twenty-two (22) per cent of micro-businesses also admitted to paying superannuation contributions late compared with just 3 per cent of organisations with more than 1000 employees.
Healthcare organisations make the most frequent errors
Organisations in the healthcare, social assistance and disability services industries had the highest rate of employee payment errors, at 43 per cent, compared with other industries. This sector also had the highest rate of late payments, at 12 per cent.
Surprisingly, 18 per cent of financial services organisations admitted to making late superannuation contributions – higher than in any other industry.
Australian Payroll Association CEO Tracy Angwin says: “With more companies facing employee underpayment scandals it has become crucial for organisations to minimise the incidence of payroll errors. Accurate pay and entitlements involve making not only the correct pay and award calculations, but accurate leave entitlements and superannuation contributions within the correct timeframe. When payment mistakes occur, companies need to be transparent not only with the employee but with their superiors so that the errors can be corrected, and steps taken to avoid them in the future.
“While our data found that most of these payment inaccuracies were discovered by payroll personnel a large portion were only alerted to these errors when the affected employee flagged it as an issue. Companies can mitigate the risk of widespread payroll miscalculations by ensuring payroll staff are adequately trained or by using a specialist external payroll advisor, such as the Australian Payroll Association.”