Preparing for underpayment risks, Payday Super amid rising regulatory pressures
One CFO has reflected on how accountants and organisations can avoid underpaying their staff and prepare for Payday Super laws by embedding strong governance, control mechanisms, and systems.
In light of the underpayments made by corporations such as Woolworths and Coles, and several universities last year, keeping up with entitlements, penalty rates, Payday Super, and overtime is virtually impossible to do manually, SKG Services chief financial officer Katherine Nguyen (pictured) said.
Nguyen noted that although no organisation intentionally wants to underpay their staff, underpayments are payroll errors and governance issues, adding that many fixed salary arrangements fail to cover overtime and penalty rates.
A systemic problem
According to Nguyen, underpayments are a systemic problem: caused by weak systems, poor governance, and weak interpretations of employee awards.
“Payroll is no longer an operational function. It is a broad level risk category,” she said.
She emphasised that organisations must embed periodic independent payroll audits and clear accountability between human resources, finance, and operations.
Nguyen added that within an organisation’s control mechanisms, there must be processes, systems, procedures, and backups implemented through tools.
“If you don’t have that, you’ll have weak control governance.”
However, without the tools and a strong ecosystem, strong governance alone won’t save organisations from struggling to meet worker entitlement obligations, and Nguyen also noted the importance of audits for compliance.
Further, at the back end, she emphasised the significant role that discipline across the whole organisation plays when applying systems and embedding them in day-to-day operations.
A strong ecosystem
Periodic independent payroll audits and clear accountability between human resources and finance operations within a robust ecosystem are crucial.
Having strong governance, salary to award reconciliation, and exception-based reporting to the executive level are some other ways organisations can stay compliant.
Nguyen also recommended that accounting professionals use artificial intelligence to create ratio analysis graphs to better understand the figures that they work with.
Payday Super
“When it comes to this shift, it is [all about] cash flow governance and control redesign,” Nguyen said.
Nguyen noted that some third-party payroll software has already embedded Payday Super into their systems through a redesign.
In conjunction with the software, when Payday Super needs to be paid, mini reconciliations must be carried out to facilitate payment, highlighting the change in the control redesign and the process that will arise as a result.
“The significance that I see is [a] cash flow shift…[from] quarterly [super payments],” Nguyen said.
She noted that for smaller companies, the legislation will introduce the need for cash flow redesign and cash flow planning implications to help manage super payments.
“Accounting professionals are the advisers of [a] business. Therefore, more tools to serve [accurate advisory] are recommended.”
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