A recent ruling on underpayments has sent shockwaves through Australian employers, particularly big names like Coles and Woolworths. Experts warn that the decision could trigger a wave of massive liabilities, forcing companies to overhaul their payroll systems. This could change the landscape of workplace compliance across industries.
The ruling, which affects the ability of companies to offset underpayments with overpayments from other periods, will have far-reaching consequences. It is expected to cause underpayment bills to balloon by three to five times, particularly for companies that previously relied on such offsets. Tracy Angwin, CEO of the Australian Payroll Association, pointed out that this is a wake-up call for CEOs and board directors who can no longer afford to ignore payroll compliance, reports Afr.com.
The legal industry: a special case
One of the most challenging aspects of the ruling is its impact on law firms, where junior lawyers often work long hours for little pay. The decision makes it clear that this practice can no longer continue, which could create serious compliance issues in the legal industry. The ruling could have long-term effects on law firms’ ability to operate their payroll systems in the same way.
Experts suggest that many employers will now have to rethink how they handle payroll and record-keeping. Izzo, a compliance expert, noted that record-keeping breaches are common in businesses with higher-paid staff, and the ruling will require companies to change their decades-old practices. However, he expressed doubts that these changes would happen easily, as many employers prefer to maintain a culture of trust rather than a clock-on, clock-off system.
Adapting payroll systems to new compliance rules
For employers looking to adapt, Jessica Tinsley, a special counsel at Kingston Reid, recommended considering enterprise-level “annualized salary arrangements” or better use of individual flexibility agreements under modern awards. These strategies could help businesses manage payments over time and avoid running afoul of compliance rules. Companies will need to be proactive in adapting to these new structures to avoid costly penalties.
In the meantime, some large employers are already introducing new technology to better track payroll inputs and outputs every fortnight. While this may come at a significant cost, it could prevent the kinds of underpayment issues seen at Coles and Woolworths. This could become the standard for companies looking to ensure compliance moving forward.
The supermarkets, meanwhile, are still deciding whether to appeal the decision, with a final decision expected early next year. For now, the ruling serves as a stark reminder to all employers about the risks of poor payroll practices and the increasing regulatory scrutiny on workplace compliance.
