How tech impacts payroll compliance for Australian charities

Payroll compliance is incredibly difficult for many charities in Australia.

Last year, aged care provider, Southern Cross Tasmania recognised they underpaid their staff $6.9 million over the past 7 years.

Recently World Vision Australia back paid $6 million in accidental underpayments.

Unfortunately, these stories are just a few of those out there.

While no charity would intentionally underpay their staff, it happens more often than anyone wants to admit because of Australia’s complex payroll rules.

Why is payroll compliance so hard?

In Australia, modern awards were introduced in 2010 to cover employee entitlements to ensure a minimum level of employment conditions were set as fair standards.

There are over 100 awards applying to just about any occupation and industry, and they cover minimum pay, the hours of work, rostering, breaks, allowances, penalties and overtime.

If you work in a typical office environment, you may not know how difficult these awards are to administer since they are simple for a typical 9-5 worker and do not cover higher-income employees.

However, in the charity sector, it can be an absolute nightmare to calculate what is due to each employee at the end of the pay cycle. This is because of the complexity of their work that often involves a range of skills, shifts and employment statuses.

Some of the nuances that make payroll compliance for charities can include things like:

• Different rates for a 17-year-old employee versus one older. Was their rate automatically increased on their 18^th birthday?
• Different overtime and penalty rates on Saturdays versus Sundays versus a Holiday – major challenge when so many charities have staff working 365 days a year.
• Different rates and penalties if the employee is rostered to work during a night or day shift.
• Penalties if an employee is scheduled to sleep at their workplace and is interrupted during the night.
• Grey area about when a shift ends if it crosses pay periods.
• Different penalties if someone has to react to a work situation while on call versus on a shift.
• A single employee can be on 2 different Awards on the same day, such as a trainee nurse who does clerical work for the organisation half the day.
• Substitute shift workers may be the only one available but have already worked a full “work week.”
• Staff may cover their relief colleague who is running late or doesn’t show up – happens too often when you can’t leave a vulnerable person(s) alone.

And these are just a few examples. It’s no wonder that payroll compliance in charities can be incredibly difficult.

 

When technology fails in payroll compliance

When you have such complex payroll requirements, technology can be useful, but only if it meets the organisation’s needs.

More times than not in the case of underpayments, the charity executives had too much faith in the technology to properly apply the award to an individual’s paycheck.

And when you are a larger-size organisation, it’s even harder for managers to catch these issues.

Unfortunately, too often the technology fails to meet the charity’s needs because:

• It wasn’t set up properly in the first place.
• It wasn’t reconfigured when awards changed (as they do every year).
• It wasn’t reconfigured when the business needs change, such as the addition of services.
• The technology was never flexible enough to meet the complex needs in the first place.
• It’s not properly integrated with other systems (like that for rostering), which forces manual intervention.

 

How to use technology better for charity payroll needs

With this serious risk of payroll non-compliance, it’s incredibly important that charities feel confident in the technology they do use to pay their staff.

So how do you do this?  Ask more questions!

• What system is doing the Award interpretation?
• What other systems feed information to the payroll system? Manually or with auto integrations?
• Where are the grey areas in the Awards? How is the system configured to interpret these?
• When was the last time the system’s configuration was reviewed? How often are sample cases calculated manually to test the configurations of the system?
• Have the minimum rates and superannuation percentage been updated as required? Check even if the vendor was supposed to manage that.
• How often do you get complaints about incorrect paychecks from staff?
• How much manual intervention does your payroll team do each pay period?

While these are just a few of the questions I recommend asking, they should get you started.

By the way, for those of you outsourcing your payroll function, it doesn’t mean you outsourced your payroll compliance obligations as an organisation. So, this applies just as much.

 

Yet, sometimes technology is not to be blamed for payroll compliance issues

Despite all the issues that technology can cause for payroll compliance, I’ve seen charities with the best payroll systems still having issues.

Why?

Because sometimes it’s actually a people or process issue that’s causing it. A better payroll system won’t fix these types of problems.

These kinds of “root cause” issues can show itself with a wipe board review of the current state – something I highly recommend for any complex processes.

Sometimes, it could be a poor roster management practices or a timecard compliance issue that can be fixed through training and policies rather than new tech.

So, wouldn’t you like to know this before you make the investment into a new system?

 

Final Thoughts

Charities exist to make the world a better place. As such, they would never underpay their staff on purpose. Instead, payroll compliance is hard because of Australian regulations.

Yet, technology could be either the cause or the fix for when noncompliance occurs. However, before you make that investment – make sure it’s not a people or process issue first.

 

I regularly help Not for Profits with IT investment decisions.  Let me know if you need some help.

P.S. If you found this article helpful, you might want to read these too:

• The risk of replacing an individual IT system in functional silos
• How an IT strategy can boost your Not for Profit’s impact

 

 

Tammy Ven Dange is a former charity CEO, Association President, Not for Profit Board Member and IT Executive. Today, she helps NFPs with strategic IT decisions, especially around investments.