What’s With Australia’s Payroll System?

In 2017, when Celebrity chef George Colambaris’ hospitality empire, Made Establishment, was found to have underpaid 162 workers by AU$2.6 million, the organisation immediately took steps to repay the staff.

However, investigations by KPMG and Fair Work Australia revealed more was owing and in 2019, it became apparent that Made Establishment had, in fact, underpaid more than 500 current and former employees a massive $7.8 million.

Not surprisingly, in February this year, Made was put into administration – having been in business for 13 years, it took just six months for George’s business to collapse.

When asked about the payroll system at Made, a person (who wished to remain anonymous) was quoted as saying, “Imagine one person with a calculator and a ledger book in a back-office trying to sort out pays for (several hundred) staff and you wouldn’t be too far from what the set-up looked like”. 

Made Establishment wasn’t the only high profile brand to come unstuck over its payroll in 2019. Woolworths, including Dan Murphys and Big W, was found to have underpaid 6,000 supermarket staff by somewhere between $200 million and $300 million. Repayments of unpaid wages, superannuation and interest were commenced. Other companies followed.

While there has been plenty of speculation over whether or not the underpayments were intentional or accidental, one thing is for certain: they expose the ripple effect that can occur when payroll is not appropriately managed.

Changes Made

The Australian payroll system is internationally famous for its highly complex set of minimum conditions, and it’s been outdated and unproductive for some time. Unfortunately, in an attempt to protect workers, six changes to employee awards and legislation have been introduced this year that make it even more complicated to manage:

Effective 1 January 2020:

  1. You must pay superannuation on your employees’ gross rate of pay – including on any salary they have sacrificed,
  2. Salary sacrifice cannot be contributed to compulsory super contributions – this means any proportion of an employee’s salary that is ‘salary sacrificed’ cannot be put into a super fund as part of the mandatory 9.5% in super contributions that you must contribute on their behalf. 

Effective 1 March 2020:

  1. You must notify employees, in writing, of their annualised salary and their maximum ordinary working hours outside the regular 38-hour week. If an employee works in excess of this, you must ensure they don’t earn below the minimum wage overall. 
  2. You must maintain a record of your employees’ start, finish and break times, and any excess hours must be paid in overtime if their annual salary is equal to or above the minimum wage. 
  3. You must pay employees for overtime worked if their salary does not cover that over time. And, if they receive less pay on their annualised wage agreement than if they were paid under the award, you must make up the difference within 14 days. Assessment of the total amount paid needs to occur every 12 months, even upon termination of a contract.
  4. Under the proposed SG amnesty, you must self-correct any unpaid superannuation. 

Compliance is Crucial

As an employer, you are obliged to take employment law as seriously as you do the tax law. With further changes to payroll anticipated, taking the advice of a qualified payroll professional, who can keep abreast of the upcoming changes, is critical to compliance.

The Ayers Group has developed a sophisticated payroll solution that can be customised to suit your business and your needs. Our secure solution will take care of your staff payroll and your Australian tax obligations… and let you get back to building your business. Contact an expert from the Ayers Group today.