Monday 11 September - Creating Confidence In How People Are Paid

Payroll Update: Authorised Employee Deductions

The Fair Work Legislation Amendment (Protecting Worker Entitlements) Act 2023 provides greater clarity and flexibility and additional safeguards for employee authorised deductions.

Deductions for the employee’s benefit

The amendments allow employees to authorise their employers to make salary deductions that are recurring and are for amounts that vary from time to time. These deductions will only be allowed if they are principally for the employee’s benefit. This amendment eases the administrative burden on employees and employers. Previous provisions did not allow for varying deductions and required a new written authorisation each time the deduction amount changes.

The changes provide greater flexibility for employers and employees to manage deductions. Offering variable deductions and authorising them remains optional for both employers and employees. Employees may continue to authorise deductions for specified amounts only.

The amendments protect employees by requiring any written authorisation for a deduction to include any information prescribed by the regulations. Varying deductions are prohibited if the deduction directly or indirectly benefits the employer or a party related to the employer, with limited exceptions. Employees can also specify an upper limit when authorising a deduction that may vary from time to time.

A new written authorisation will only be required to vary the amount of an existing deduction where the initial authorisation specifies the amount of the deduction. Existing deduction arrangements may continue if they meet the requirements of the amendments.

What do these changes mean?

The amendments clarify the circumstances in which employees can validly authorise salary deductions. The changes provide increased certainty for employers and employees as to when a new written authorisation is required for deductions to continue. These provisions also empower employees and employers to make agreements about deductions which are principally for the employee’s benefit.

The amendments also recognise the validity of existing authorisations that comply with the provisions (for example, that specifically authorise employers to deduct amounts that vary from time to time). Unless they are withdrawn, these authorisations will continue to operate as though they were validly made. This respects the employees’ ability to choose to authorise deductions that are principally for their benefit.

When will these changes come into effect?

The amendments commence on 30 December 2023

Action Items

• Review and update your payroll processes to ensure compliance with these new Fair Work Act changes.
• Familiarise yourself with the details of the legislation and seek professional advice if needed

Avoiding a Plutus Payroll trap: Lessons for employers

The recent sentencing of Adam Cranston for his role in the Plutus Payroll tax fraud has sent shockwaves throughout the payroll and business communities. The multi-million dollar scam involving withheld PAYG (Pay As You Go) taxes is a stark reminder of the potential vulnerabilities in payroll operations and the need for diligence, transparency, and robust processes.

The Plutus Payroll scandal unearthed

Plutus Payroll, under Cranston’s oversight, had contrived an intricate web where they syphoned off tax payments intended for the Australian Tax Office (ATO), leaving countless businesses and employees inadvertently complicit in a tax fraud. This isn’t just a narrative of corporate fraudulence; it’s a cautionary tale for all employers on the necessity of being proactive and knowledgeable about their payroll responsibilities.

Protecting your business: Key takeaways

1. Due diligence with third party providers: Always conduct thorough background checks on third party payroll providers. Look for established track records, client testimonials, and any past infractions. It’s crucial to ensure that they are legitimate and reliable before entrusting them with your payroll processes. If a service is being offered for free, you are likely paying in other ways.
2. Regular audits: Regularly audit your payroll processes, even if outsourced. This ensures, amongst other things, ?that the amounts being deducted from employees’ wages align with the amounts remitted to authorities.
3. Transparent communication: Open channels of communication with your employees about their payslips. Encourage them to review their deductions and raise any discrepancies they might spot. An informed and vigilant workforce can act as an additional layer of oversight.
4. Understand your obligations: As an employer, it’s essential to be well versed with your payroll and tax obligations. Regular training and updates on legislative changes can keep you and your team abreast of your duties.
5. Adopt technology: Modern payroll software solutions come equipped with features that ensure compliance, track anomalies, and provide regular updates. Invest in good technology that makes the payroll process transparent and well governed.
6. Engage in industry networks: Being a part of industry associations, like the Australian Payroll Association , can provide you with resources, updates, and best practices in payroll management. Regularly attending seminars, workshops, and webinars can also be invaluable.

Moving forward with vigilance

The Plutus Payroll scandal is a lesson for employers, signalling the importance of diligence and awareness. In today’s fast paced business world, overlooking the intricacies of payroll operations can be tempting, especially when relying on third party providers or software. However, it’s essential to remember that, ultimately, the responsibility rests with the employer and this cannot be outsourced.

To foster a culture of compliance and vigilance, employers must continually educate themselves, invest in reliable technology, and ensure regular checks and balances. Only then can we hope to negate the chances of another Plutus-like fiasco in the future.

Payroll FAQ - Leave paid out on termination.

Question.

Can I deduct Notice from Leave paid out on termination?

Answer.

Sometimes we have employees that resign without giving notice. Fair Work states; Most awards say that an employer can deduct up to one week’s wages from an employee’s pay if:

1. the employee is over 18
2. the employee hasn’t given the right amount of notice under their award
3. the deduction isn’t unreasonable.

However, employers can only deduct from wages owed under the award. They can’t deduct from other entitlements owed to the employee, such as accumulated leave or other over award payments. As a result, if you have an employee that has not given notice and they have no wages to deduct from, you cannot deduct it from Annual Leave paid out on termination.

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Southern Cross Care in Tasmania signs Enforceable Undertaking

Tasmania’s largest aged care operator, Southern Cross Care (Tasmania) Inc, is back-paying staff almost $6.9 million and has signed an Enforceable Undertaking (EU) with the Fair Work Ombudsman.

The not-for-profit organisation, which operates aged care facilities and offers home and community care services, self-reported its breaches to the Fair Work Ombudsman in August 2021 after identifying them during an internal review.

Southern Cross Care (Tasmania) conducted the review after identifying fundamental errors in its payroll and human resources systems.

The errors included failing to have agreements in place with part-time staff to work additional hours at ordinary rates of pay. This meant that employees were entitled to – but not paid for – overtime for these additional hours.

Southern Cross Care (Tasmania) also failed to recognise that shift-workers without written agreements were entitled to be paid from the start of their first shift to the end of their final shift each day, rather than just the hours worked during the separate shifts.

The underpaid employees performed work in locations across Tasmania including Hobart, Launceston, Somerset and Low Head. Underpayments occurred between 2015 and 2022.

Most underpaid employees were part-time aged care workers, nurses and community care workers who performed shift work, although full-time and casual employees were also affected. Some cleaners, laundry and maintenance staff were also underpaid.

Southern Cross Care (Tasmania) is back-paying 1,708 current and former employees a total of $6.87 million, including $5,806,756 in wages and entitlements, plus $313,591 in superannuation and $754,181 in interest.

Individual back-payments range from less than $1 to more than $220,000. Six workers were underpaid more than $100,000. The average back-payment is just over $4,000.

Southern Cross Care (Tasmania) has already back-paid the large majority of employees, including all it could find, and under the EU must back-pay all staff by the end of September.

Fair Work Ombudsman Anna Booth said an EU was appropriate as the employer had cooperated with the FWO’s investigation and demonstrated a strong commitment to rectifying underpayments.

“Under the Enforceable Undertaking, Southern Cross Care (Tasmania) has committed to implementing stringent measures to ensure all of its workers are paid correctly. These measures include commissioning, at its own cost, three annual independent audits to check its compliance with workplace laws,” Ms Booth said.

“This matter demonstrates how important it is for employers to place a high priority on their workplace obligations. Fundamental errors – including failing to ensure that written agreements with part-time employees were in place – were left unchecked, which led to long-term breaches and a substantial back-payment bill.

“We expect all employers to invest the time and resources to ensure they are meeting all lawful entitlements.”

The EU also requires Southern Cross Care (Tasmania) to provide FWO with evidence of systems and processes it has put in place to ensure future compliance; commission workplace relations training for human resources, payroll and rostering staff; write to all underpaid employees to notify them of the commencement of the EU; and display workplace notices detailing its contraventions.

Whilst overtime entitlements accounted for the majority of total underpayments, employees were also underpaid wages for ordinary hours, penalty rates for weekend and public holiday work, as well as paid meal breaks and shift penalties and allowances, including sleepover allowance.

The underpayments were under the Social, Community, Home Care and Disability Services Industry Award 2010 and applicable Enterprise Agreements.

Harnessing the power of AI in modern and future payroll practices

Artificial Intelligence (AI) is rapidly transforming industries around the world, and the realm of payroll is no exception. As payroll processes become increasingly intricate with evolving work structures and regulations, the integration of AI can offer unprecedented efficiency, accuracy, and forward-thinking solutions. Let’s explore how AI is currently reshaping payroll and the potential innovations we can anticipate in the near future.

Current AI Implementations in Payroll

1. Automated data entry: One of the most immediate uses of AI in payroll is in automating mundane and repetitive tasks. Machine learning algorithms can be trained to enter data, reconcile timesheets, and even flag discrepancies, drastically reducing manual errors and saving considerable time.
2. Chatbots and employee queries: Many employers have introduced AI-driven chatbots to assist employees with payroll related questions, from leave balances to tax deductions. These chatbots can offer real time assistance without the need for human intervention, enhancing employee experience and freeing up the payroll team’s bandwidth.
3. Predictive analytics: With the power of AI, payroll systems can predict trends based on historical data. This could include forecasting overtime during peak seasons or predicting potential compliance issues based on changing workforce structures.

Future Potential of AI in Payroll

1. Personalised employee financial insights: Imagine a system where employees receive tailored insights about their financial health, spending habits, or tax saving opportunities, all derived from their payroll data. AI could analyse an individual’s earnings and deductions over time, offering recommendations for investments, savings, or even tax planning, in accordance with financial advice parameters.
2. Global payroll management: As businesses expand globally, handling payroll across different countries, each with its unique regulations, becomes challenging. AI could seamlessly integrate and adapt to various global payroll regulations, automatically adjusting for currency conversions, local taxes, and benefits, ensuring compliance and uniformity.
3. Enhanced fraud detection: With the increasing sophistication of financial fraud, future AI-driven payroll systems could employ advanced anomaly detection techniques. This means any irregular or suspicious payroll activity, be it from internal sources or external threats, can be identified and flagged instantly.
4. Dynamic payroll adjustments: As the gig economy grows and work structures become more fluid, AI could assist in dynamic payroll adjustments. For instance, AI could automatically adjust payments based on real time performance metrics, seasonal demands, or even external economic indicators.
5. Intuitive employee onboarding: New employee onboarding often involves multiple steps in payroll setup, from bank details to tax declarations. AI can streamline this process, guiding the new hire through each step interactively, ensuring all necessary details are captured accurately and efficiently.
6. Integration with biometric and IoT devices: In the future, AI could seamlessly integrate payroll systems with biometric devices, Internet of Things (IoT) wearables, or even augmented reality tools. This means real time tracking of work hours, breaks, and overtime through smart devices, ensuring precise payroll computations.

Challenges and Considerations

While the potential of AI in payroll is vast, it’s essential to approach its integration thoughtfully. Data privacy is paramount, and businesses must ensure that AI implementations adhere to Australian and global data protection regulations. Additionally, continuous training and updating of AI models will be crucial to stay relevant and accurate.

AI’s infusion into payroll practices is more than just a trend—it’s an inevitable evolution that promises efficiency, accuracy, and a proactive approach to challenges. As businesses grapple with an ever changing employment environment, embracing AI in payroll might not just be a strategic advantage but a necessity for sustainable payroll improvement.

Payroll Training Events

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Payroll did you know - LEAVE

Leave?– Did you know that under the NES some shift workers get 5 weeks of annual leave a year instead of 4 weeks?

But this will only apply if their award or agreement contains a definition of a shift worker for the purpose of the NES.

Australian Payroll Association - September 2023