RECENT high-profile cases have brought the risk of underpaying employees into sharp focus of employers and the authorities and leading automotive industry consulting group, KPMG Motor Industry Services, is warning dealers to make sure they are on top of their payrolls.

The penalties for getting it wrong are costly, unpleasant and distracting. Additionally, the media attention received by employers alleged and found to have underpaid employees has highlighted the significant implications to a company’s reputation that can directly affect an organisation’s overall brand image and performance.

So, as well as having to stump up the funds to make up for shortfalls in payments to employees, employers found to have been in breach of award obligations can be penalised up to $630,000 for serious breaches.

In a briefing prepared for GoAutoNews Premium, KPMG MIS said: “We are now in the midst of an increased focus on employment practices across a number of Australian industries.

“In particular, employers are increasingly aware of their payment obligations and record keeping practices in light of the Fair Work Ombudsman’s focus in these areas and changes to the Fair Work Act (Cth) 2009 (Fair Work Act).

“It has therefore become imperative that Australian employers are ensuring they meet the minimum compliance standards in relation to entitlements and conditions. In addition the proposed Superannuation Guarantee Amnesty and the introduction of single touch payroll introduce further incentives to review historic payroll records.

“Dealers cannot afford to get this wrong,” the KPMG briefing said.

“The industry is in the grips of the worst period of decline on record, with December recording the 21st consecutive monthly decline in sales volume.

“This is having a major impact on the bottom line of dealers across Australia and having to make up dollars found not to have been paid as well as pay hefty fines or penalties would come at an especially bad time.”

KPMG said that a team of its specialists in the payroll field has done some investigation into the potential root cause of the errors dealers are typically making and has developed some insights and pointers that dealers should consider and address with some urgency.

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These include:

• Assigning classifications to roles – The Vehicle Manufacturing, Repair, Services and Retail Award prescribes classification levels and rates of pay to particular roles. What are the management and maintenance processes around the classification of staff and the appropriate rates of pay applicable?
• Updating changes to the award – Who is responsible and what are the triggers in place to ensure the payroll system is updated for these changes on time, every time?
• Deductions against pay – What governance do you have around the correct application of these deductions?
• Wage system – Is your wages system being adequately maintained, updated and properly configured to perform the correct statutory payment calculations for things like PAYG, superannuation and payroll tax?

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“The award can be very complex and detailed so it can be very cumbersome and confusing for HR/payroll teams to navigate and interpret. It is worth seeking advice or a second opinion in some cases,” the briefing said.

“Many dealers outsource some of their HR activity, leaving dealer principals and management with a level of comfort that their risk in this area is somewhat mitigated.

 

“Often the payroll processes and the respective systems are still maintained internally, and often by people not fully trained or conversant with the intricacies and application of the award.

“Unknowingly mistakes can occur, and without regular audit of the payroll process and system, especially those high-risk areas mentioned earlier, they can go undetected for years, mounting up to a significant payroll liability, not to mention the knock-on effect of the underpayment of superannuation and payroll tax.

“In our experience, organisations today are growing rapidly in size and complexity, with increasing pressure on support services such as payroll and HR to keep pace.

“Our work to date has highlighted vulnerability is more common in dynamic environments where there is a high volume of changes in the mode of employment, contracted hours for part-time employees and employee classifications.

“In environments with mature governance measures in place, employers were still challenged by intricacies in rostering and overtime rules, recording and payment of breaks and allowances. To this end, there is a clear need to ensure systems are configured in a way that ensures compliance,” the briefing said.

Read more: Eagers declares payroll shortfalls

By John Mellor