PAYROLL PROBLEMS: Blaming the payroll system for your underpayments is wrong. Here’s why.

“There was an error in the payroll technology ” said all of the faces of a range of underpayment cases across Australia in the last couple of years. Given our over-reliance on digital technology and rapid digital transformation, we’re likely to see that excuse time and time again.



For reference, payroll technology, including HRIS systems, accounting and bookkeeping software is now a multi-billion dollar industry promising companies of all sizes a simple way of reducing the time they spend on paperwork each year. These technologies offer a raft of innovative pay calculation logic and award interpretation engines that are fantastic.


In an era where companies have been under-investing in their in-person payroll compliance for years, these technologies are promising the world and reassuring businesses they will achieve compliance.


However, these technology engines are only as good as the fuel that is put into them. In this case, the fuel is data – payroll data, HR data, timesheet data and hours/locations/days worked. The input, extraction and migration of the data is also affected by a wider business context of the people and processes that are used to manage the payroll system.


“When you read the license contract of a payroll solution, you learn that these systems are fantastic at dispersing money and recording various work conditions for a number of employees. If they’re configured properly, they’re good at tax calculations or overtime recording or board dashboard reporting. What they’re absolutely useless at is understanding how the data got there, how the human on the endpoint entered that data, or how the data is then pushed through a series of departments and integrations to come to a complete process,” says Executive Director of AgileXperts – Brett Cowan.


Brett Cowan says while digital payroll systems were improving, Australian businesses simply must have a keen eye and understanding of their end-to-end payroll system, including people and process with professionals checking the input of data to ensure the right amount is paid.


“There is a high level of trust put into payroll technology providers by their customers that they will fix the problem or guarantee compliance. This is reiterated during the sales cycle, however, during implementation – once the contract is signed – this expectation falls drastically short.”

While digital payroll processors also hold no responsibility for pay discrepancies, it is often the business that wears the reputational and compliance risk of underpayments. And while many businesses have robust payroll processes, these are often greatly under scoped or investigated prior to implementing payroll technology.


“Once the technology goes in, we often see too many major mistakes that involve unknown workarounds or human intervention that was never documented or understood in the first place. Businesses will also often fail to test their new system in parallel to their current system, or develop a pilot payment roll-out prior to going live. They then go-live and create major havoc by either missing staff payments or majorly overpaying staff and having to claw-back.” says Cowan.


Both MYOB and Xero, the nation's largest players in small business accounting and payroll software, said systems had limited ability to recognise common errors and that users must employ counsel from specialist payroll project providers like AgileXperts or employment relations specialists such as ER Strategies to ensure they are doing the right thing.


"Our terms reflect the legal requirement that responsibility for payroll is with the employer. Engaging with an accountant or bookkeeper is advised to ensure the small business is fully across all compliance needs," a MYOB spokeswoman said.


"As with all technology, payroll software is only one part of the solution, and is only as accurate as the information entered into it, combined with the knowledge and experience of the user," said Matthew Prouse, Head of Industry at Xero Australia.


As for AgileXperts’ opinion, the key to success is to understand the payroll system end-to-end from customer experience, to business process mapping, application management, data mapping and integration and finally to awards interpretation.


“There are major blocks of work associated with a payroll transformation that span across operations, data, process and various business units. Technology and payroll processing engines are only one minutiae of a bigger piece. To truly understand the bigger picture, companies must engage with payroll project specialists to succeed.”


If you’re experiencing one of these challenges and are unsure where to step to next – line up a chat with one of our Payroll Project Xperts today to roadmap your path to success. We can help guide you to a successful implementation with your existing technology, rescue your project or help prepare you for the perfect implementation from the get-go.

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