The importance of wages compliance for small business owners

Media reports of wages underpayments by high-profile employers have drawn focus on the importance of wages compliance for small business owners, who may need professional guidance on payroll calculations to ensure peace-of-mind.

Any business with employees could be audited

Payroll can be a challenging area for small business owners to manage, due to Australia’s complex employment regulation system and common misunderstandings surrounding employee remuneration requirements and associated tax legislation.

Australian State and Territory Revenue Offices frequently audit businesses to ensure they are complying with their financial obligations as employers. However, in some industries, underpayment is so prevalent that it’s almost endemic. For example, retail, hospitality, transport, and many other sectors of business can involve tricky calculations of rates, loadings, and allowances for different types of employees in varied conditions.

When a business is found to be non-compliant, there are serious consequences that can damage the reputation of the business and impact its bottom line. The high-profile failings of some large companies can serve to remind small business owners of the need to ensure compliance with payroll requirements. Having an inhouse bookkeeper, or a whole payroll department, doesn’t necessarily mean that wages calculations are made correctly, and the business is liable even when payroll mistakes are made by suitably qualified employees.

How to ensure that your business payroll is compliant

To minimise the risk of making ‘honest mistakes’ around the calculation of wage rates, entitlements, annual leave, penalty rates, etc, business owners can:

• Make sure employee records are kept up-to-date
• Provide payroll staff with the tools and training they need to understand employee entitlements
• Regularly review changes published by the Fair Work Commission
• Notify employees immediately if any wage discrepancies are identified
• Report discrepancies to the relevant authority if necessary
• Immediately back-pay any entitlements that were underpaid

Because wages compliance is vital for every business with employees, it’s important for business owners to get help if they lack confidence in the currency and accuracy of wage-related calculations for employees and the rules for payroll compliance affecting the business.

Billings + Ellis can help small business clients by undertaking a ‘payroll calculations compliance check’ to ensure that the business is paying employees in accordance with the relevant remuneration, taxation, and superannuation requirements.