It’s a Payroll Disaster! How Software Can Help you Avoid Expensive Mistakes
When it comes to cash flow, one of the biggest outgoings you will likely incur is payroll. It’s therefore essential to get this right. If you don’t there are major financial and reputational consequences. Recent payroll issues at multiple large companies are providing an opportunity for HR software providers to solve a major problem. Legal and reputation issues are a big deal! It’s essential to make sure this doesn’t happen to you. Let’s discuss what happened at McDonald’s in New Zealand and Qantas & CBA in Australia, in order to get a global perspective. We’ll also dive into exactly how modern onboarding and recruiting software is such an effective method to help your business avoid payroll and other administrative issues. It’s also important to consider payroll and tax requirements differences between different jurisdictions and countries. Luckily the software is built to do this for you!
Case Study #1 – McDonalds NZ Underpayment
Hey Ronald, what happened here? They are liable for up to $29 million in unpaid wages over the past 10 years. Whilst an incredibly complex situation, it’s worth examining what went wrong and why. The issue was first raised in 2015 but only come to full light in the last month. That’s a long time for an issue to ‘hang around’. Essentially, the payroll problem started with a new law interpretation. The legislation in question was called the Holidays Act (2003).
This law is extremely complex and open to misinterpretation. Particularly for employees who work irregular hours (e.g. a casual McDonalds crew member). The Minister of Workplace Relations, Iain Lees-Galloway, acknowledged this. He reiterated the “need to look at the Holidays Act with a fresh pair of eyes and ensure it is fit for modern workplaces and new working arrangements”. The takeaway? Make sure you proactively seek to understand how the laws impact you and your business. Take appropriate action to ensure your systems are correct from the get-go.
Case Study #2 – Qantas and CBA Payroll Issues
Companies are now owning up to errors and taking action to fix them. Ideally, we’d love to avoid errors in the first place. Both Qantas and CBA, large multinationals, both blamed “errors in the system” for why they missed payments, totalling up to $11 million and affecting over 8000 staff members. Is a system error of that magnitude really acceptable? Not at all. The impact of these issues, large or small, cannot be understated. Not only do the payments need to be made, but staff are also ripped off and the company’s reputation can be severely damaged. Do you want this to happen to your business? Of course not…
A great way to potentially avoid this:
Digitalise and automate your recruiting and onboarding process as much as possible! It’s far more effective to use modern technology to reduce manual tasks, and errors, in order to free up time into risk management and other value-adding activities. For example, staying up to date with the latest pay-related legal developments, and implementation would be a more valuable use of company time than filling out manual paperwork… right?
Now, let’s look at some specific examples…Handwriting and/or incorrect interpretations of text can cause problems down the line, for example, incorrect banking or superannuation details. A digital onboarding system eliminates almost all manual data entry and therefore reduces the rate of errors dramatically. The result is an efficient onboarding system, for both the business and the new hire, that is not tedious or prone to mistakes.
It’s also important to consider the ongoing implications of the onboarding process. With traditional onboarding, ongoing reporting and data sourcing is also a largely manual process. As such, it may be too difficult to do and data, insights and important reporting information may be missed. Furthermore, audit trail requirements may dictate that records must be obtainable. These information requests are understandably a pain to many, however, they are necessary & inevitable – so why not make it as easy for the business, and the auditor, as possible?
How has MyRecruitmentPlus taken the US Payroll into account?
You can completely customise and automate wherever possible the recruitment and onboarding software offered by MyRecruitmentPlus. It’s also globally accessible and customised. Initially rolling out in the advanced Australian and UK labour markets, we’ve now expanded to the US market. The main difference we see is the way tax forms and documents are handled during the contract signing and onboarding.
The candidate AND the employer are required to fill out different parts of the same forms which must be sourced and processed through the IRS (Internal Revenue Service). In addition to this, practitioners must allow for multiple languages, Spanish and English at a minimum. In Australia, the ATO (IRS-equivalent) seems to be far more aggressive, or comfortable, with using technology which makes the integration process a bit easier. I can proudly say no one else has bridged this gap the way we have!
Need another reason?
Almost every company is looking to reduce their environmental impact. We all want to take action on their corporate social responsibility mandate. Sometimes the way to do this is very clear, for example, an office could switch to renewable energy sources. However, continual improvement demands continual innovation. Here we have one such way to go about improving a company’s environmental impact – how many trees are HR sacrificing for traditional onboarding practices? We estimate 1,000 companies could be consuming the entire tree population of Centennial Park, in just 5 years! How’s that for an additional motivator? Best of all, you’d be making this difference without even having to do anything extra – it’s simply a by-product of using digital onboarding software.
The ONE takeaway you need to remember!
It’s evident that these issues are significant and meaningful. Anyone in senior management, or HR, should be on top of potential risks in their organisation and seek to minimise the risk of payroll issues as much as possible. As we’ve seen with McDonald’s in NZ, as well as Qantas and CBA globally, is that these issues can blow out to be extremely large – $10m+! There’s not necessarily a one-stop-shop solution to errors however reducing the risk as much as possible is clearly highly desirable.
As such, it may be wise to consider investing in digital recruitment and onboarding software. Software that suits both complex, multinational companies as well as agile small businesses. Instead, focus your precious company time into staying up-to-date. Remain informed about the latest legal and accounting developments. Consider how they might impact employee pay and any proactive changes your business needs to make. Best of luck, until next time,