The Questions That Boards Should Be Asking About Payroll Compliance
Clare Long
‘No-fluff’ HR Solutions for Australian SMEs | CEO at Norgay HR | GAICD Non-Executive Director
With the recent amendments to the Fair Work Act introducing severe penalties for wage theft, Boards must be more vigilant than ever about payroll compliance. The legislation is undeniably complex, but this complexity does not excuse non-compliance. Under the new regulations, intentional wage theft can result in penalties of up to 10 years in prison and substantial fines for individuals and corporations. Ensuring payroll compliance is not just a legal requirement but a critical aspect of Board governance.
Here are essential questions Boards should ask to mitigate risks and ensure compliance.
1. How confident are we about our payroll compliance accuracy? Boards must aim for 100% accuracy in payroll compliance to avoid significant financial implications. Even a 1% error rate can lead to substantial underpayments, legal actions, and reputational damage. Therefore, it’s vital to ensure robust processes and procedures are in place to achieve absolute precision in payroll compliance.
2. What systems and processes are in place to ensure legal compliance in employee payments? Boards need to carefully examine the company's compliance systems and processes. High-risk indicators may include relying solely on payroll systems and manual processes. On the other hand, low-risk indicators would involve well-documented processes, legally compliant procedures, integrated automation, comprehensive reporting to the Board, and regular compliance reviews.
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3. What reporting mechanisms are available to keep the Board informed about compliance status? Effective compliance oversight necessitates leveraging technology for detailed reporting. Your payroll system should provide your Boards with concise, insightful reports, ensuring comprehensive understanding without overwhelming you with operational details.
4. Who holds ultimate accountability for payroll compliance? Who is in charge of payroll compliance often lacks clarity due to responsibilities being spread across various teams like payroll, workforce planning, legal, and technology. Ultimately, the Board, particularly within its risk or audit function, is accountable. While day-to-day management can be delegated to roles such as the CEO or CFO, depending on the company's structure, the Board must maintain high-level oversight through regular updates.
5. Do we have a culture of compliance throughout the organization? A culture of compliance, starting from the Board and permeating through the organisation, is essential for sustained compliance. Your Board should actively engage with compliance information and set a compliance-centric tone.
By addressing these questions, Directors can better manage compliance risks, safeguard the organisation’s reputation, and ensure long-term success.
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5 个月The checks and balances in place by having a proactive and professional Board can't be overvalued. Thanks for sharing these questions and answers. It's good content for management and boards alike.
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5 个月Great post! The new Fair Work Act amendments definitely make it clear that payroll compliance is more critical than ever. With such severe penalties for wage theft, Boards really need to stay on top of this. These questions are a great starting point for ensuring everything is in order.
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5 个月The buck definitely stops at C-Suite and board level, even though the nuts and bolts work of rewarding staff is done at the coal face in payroll. And they need to get it right. My daughter left her previous job in retail as the employer continually screwed up her pay (accidental overpayments, underpayments of hourly rates for incorrect roles, working longer hours than paid etc) and blamed everyone but themselves. Probably should have dobbed them in to the FWO. What a great culture to work in eh?
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5 个月Learning and knowing about payroll compliance is something that many do not know enough about Clare Long Super share of the aspects to be aware of Roy Kowarski : Branded Promotional Product Strategist and founder of Out There Branding, sharing #PromotionalProducts, #BrandingTips and #MarketingIdeas
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5 个月It amazes me how many people at the board level think that they can just abrogate their responsibilities. The FWC and FWO are pretty powerful aren't they Clare Long ?