Transitioning from outdated payroll processes to unified payroll and HR systems can help organisations address compliance challenges.
Businesses are operating in an era where precision in payroll management is paramount, but many organisations are struggling to maintain compliance. A 2024 study by Rippling and Censuswide highlights the prevalence of payroll inaccuracies, which can lead to potential wage theft in Australia, and underscores the urgent need for accurate payroll management.
Surveying 500 payroll managers across companies with 5-250 employees, the study revealed that 59 per cent admitted to making a payroll error in the past two years, with error rates escalating as companies grow.
The report identifies outdated manual processes and disparate, siloed systems as key contributors to the problem.
As the business landscape evolves, especially with major regulatory changes such as the Fair Work Amendment (Closing Loopholes Bill) which seeks to criminalise wage theft and implement hefty financial fines, the report emphasises the necessity of adopting a centralised payroll and HR system.
This shift is imperative for mitigating compliance risks, enhancing workforce data visibility and improving operational efficiency amid rising wage theft concerns.
What are organisations getting wrong?
The 2024 Rippling and Censuswide study provides a detailed look into the challenges faced by Australian payroll management, including:
- High error rates: 59 per cent of companies reported payroll inaccuracies in the past two years. For companies with over 50 employees, the rate of payroll errors exceeds the average, at 67 per cent.
- Common payroll errors: These include over or underpayments (48 per cent), delayed payments (44 per cent), employee misclassification (28 per cent), and failures to make superannuation contributions (24 per cent).
Identifying the root causes of wage theft
The main underlying issues contributing to payroll inaccuracies in Australian businesses included:
- Manual data entry
A staggering 48 per cent of businesses still rely on the manual input of employee data into their payroll systems. This approach not only consumes valuable time but significantly increases the likelihood of errors, leading to major discrepancies in employee hours, wages and entitlements.
- Fragmented Systems
The use of multiple siloed systems to handle payroll and HR operations magnifies complexity. Our study revealed that only 10 per cent of companies have streamlined their process with a single solution, while 63 per cent employ three or more solutions, and over a third (37 per cent) juggle five or more. This fragmented approach burdens payroll staff with repetitive data entry across platforms, heightening the risk of inconsistencies.
- Scale and Complexity
There is a significant correlation between company size and payroll errors. While 39 per cent of small businesses (5-49 employees) report payroll discrepancies, this figure soars to over two-thirds for businesses with 50-250 employees. The critical factor is not the size of the business but the number of systems in use, with larger companies more likely to employ multiple HR management and payroll systems, increasing the probability of human error.
Moving towards a modern payroll solution
The findings from our study underscore the need for businesses to transition towards automated and centralised payroll and HR systems. By doing so, companies can reduce administrative burdens, ensure compliance and provide a more accurate and engaging employee experience.
With nearly half of Australian businesses dissatisfied with their current HR and payroll solutions and looking to switch in the next 12 months, the time for modernisation is now.
For those ready to explore cutting-edge payroll and HR solutions, Rippling offers one unified system to streamline all employee data and operations, reducing errors and enhancing overall workforce engagement. Equipped with advanced data analytics, Rippling’s centralised solution enables businesses to make informed decisions and stay ahead of compliance requirements.
Download Rippling and Censuswide’s 2024 report and gain more insights into the state of Australian payroll here.