Payroll compliance precision: Comprehensive reviews vs sample testing

Between July 2021 and June 2023, the Office of the Fair Work Ombudsman (OFWO) returned $1.041 billion to 635,000 underpaid workers. This figure averages out to about $1.4 million in underpayments every day for two years. Any discrepancy in payroll could put your organisation under the spotlight. Perhaps you have already adopted a solution to address the risk of over or underpayments occuring. But my question is: What method does your company use to validate compliance?

How your organisation tests payroll compliance can significantly impact the results and your ability to detect inaccuracies. A sampling method that only analyses a select group of employees, timesheets, or pay results can only provide incomplete results at best. For this reason, comprehensive reviews should be the priority and are our preferred approach at Tambla; in this blog, I will explain why.

What is sample testing?

Sample testing is a method widely used in many industries and for various purposes, such as researching or surveying a population or group. For example, researchers might use sampling when attempting to understand how people in a community use public transport. Rather than interviewing everyone, the researchers will select a portion of the population to base their data on. In this instance, sampling will provide indicative results and is far more efficient than interviewing everyone.

In payroll compliance, sample testing analyses a portion of payroll calculations to verify the system’s overall reliability, avoiding an exhaustive review of every transaction. Sample testing aims to uncover possible mistakes, inconsistencies, or compliance breaches with fewer resources than a thorough audit would demand.

The process of conducting sample testing can follow various methodologies, including:

• Random sampling: Gives every employee an equal opportunity for selection by not relying on a pattern.
• Systematic selection: Selecting records based on a pattern, such as sampling every third employee on a list.
• Stratified sampling: This divides the workforce into relevant subgroups and picks samples from each, ensuring representation across different categories of employees.
• Random selection: Randomly choosing the subgroups to ensure broad coverage across various workforce segments.

What issues can sample testing create?

While sample testing provides a more efficient way to complete a payroll review, it can only give a limited picture and could lead to problems later on.?

Sampling might introduce biases into your review by only examining a specific portion of payroll data that does not accurately reflect the diversity and range of the entire workforce. This selective approach can inadvertently exclude certain groups of employees, leading to an incomplete understanding of payroll accuracy or overall compliance with industrial instruments. Such biases compromise the effectiveness of the audit, as they prevent a complete analysis of payroll calculations across the entire organisation.

Furthermore, the limited scope of sample testing raises the risk of missing systemic issues within the payroll system. By focusing on a subset of data, sample testing may overlook errors or non-compliance patterns affecting a broader workforce segment. These systemic issues, if not identified and addressed, can lead to significant compliance risks and financial liabilities for the organisation.

Tambla’s Payroll Comparison Dashboard

How comprehensive payroll reviews compare

Comprehensive sampling is a technique that analyses every data point. It reviews every employee, pay period, pay result and timesheet equally to uphold fairness and prevent compliance issues that may only impact a small group of people. Here are a few ways that Tambla’s payroll compliance system completes comprehensive reviews.

1. Combines data from multiple sources

Comprehensive payroll reviews use data from multiple sources, including Human Resources Information Systems (HRIS), Workforce Management systems, timesheets, and payroll platforms. The payroll compliance engine completes an offline review to prevent disruptions to payroll tasks. Comprehensive sampling often takes time. A payroll compliance solution uses automation to complete the review with little effort and provide precise and timely insights for every pay cycle.?

2. Gain a view of all issues within payroll

After completing a comprehensive review, the payroll compliance software provides insights via dashboards so payroll teams can identify, investigate and address potential issues. The data will reveal anomalies that may affect specific individuals, pay codes, or departments.? It can also highlight interpretation issues that affect certain working patterns or employment types. These dashboards render data in a user-friendly, graphical format. This visual and interactive approach ensures that all relevant information is readily accessible, supporting quick and effective identification and decision-making.

3. Find any payroll issues before an audit

Large businesses with many people on their payroll risk discrepancies going unnoticed. Adopting a structured governance framework and performing regular internal audits can prevent such issues from intensifying or catching the Fair Work Ombudsman’s (FWO) attention. Comprehensive reviews are instrumental in detecting inconsistencies and mistakes within payroll operations. Addressing these problems includes correcting errors, compensating affected employees, and implementing measures to prevent reoccurrence.

Conclusion

Payroll compliance is not an area where your organisation can afford to leave even one discrepancy unnoticed. While efficient for small-scale audits, sample testing inherently risks overlooking issues due to its selective nature. To achieve payroll compliance, your organisation needs a comprehensive approach to ensure every employee’s pay is accurately and fairly audited, mitigating the risk of compliance oversights.

Comprehensive payroll reviews use automation to analyse data from various sources and thoroughly review every employee’s pay. Interactive dashboards provide easy-to-digest insights and provide teams with the tools and data to identify and resolve issues. When completed regularly, comprehensive reviews provide teams with the knowledge to address issues promptly and before an audit from an external party.

Tambla’s Payroll Compliance solution comprehensively reviews your pay results

We designed our Payroll Compliance solution to provide organisations with excellent payroll reporting, auditing, and compliance capabilities as part of your wider governance of risk and compliance. Our platform enables you to do more than meet your legal obligations; we help you achieve a higher standard of payroll accuracy, reliability and fairness.

Tambla Pay Comparison is a SaaS engine that integrates with your existing schedule, timesheet and payroll data to automate compliance without interrupting your pay cycle. Our software highlights discrepancies to identify over and underpayments. It removes the need for time-consuming, random spot-checking and manual interpretation and can reduce the need for retrospective pay adjustments.

Visit our Payroll Compliance page to download our data sheet and contact us.