Last year saw a dramatic escalation in the number of incidents of underpayments involving household names across Australia, with a number of large retailers making the headlines.
The impact of getting pay wrong isn’t just paying remediation costs or reputational damage from media coverage or legal proceedings, it also has a significant impact on your staff.
If retailers are getting pay wrong, staff can become demoralised, less engaged and less productive as the foundation of trust between employer/employee breaks and an employee’s financial stress amplifies, creating a knock-on effect to business performance. A study by AMP found that financially stressed employees took 50 per cent more sick leave and double the time dealing with finances at work, compared to financially secure employees.
Getting pay right is therefore critical. It is the baseline for employee motivation, productivity, mental and physical health and more. If this sounds rational and logical, why then are we getting it so wrong? How can we not pay people correctly, especially the big companies with big budgets, lots of resources and capable management teams?
Where are retailers going wrong?
The vast majority of companies do not underpay their employees on purpose. It could be a simple mistake, like an unchecked box in payroll configuration or incorrect information in manual systems. Making matters worse is Australia’s complex industrial system. Retailers and their payroll departments must be across the varying minimum wages, penalty rates, allowances, leave entitlements, overtime and loadings which can change from state to state, industry to industry or at the whim of the most recent Court or Commission decision.
Furthermore, our reliance on short pay cycles makes getting pay right even harder. According to our research, employees on weekly or fortnightly pay cycles have a 60 per cent higher chance of being underpaid than those who are paid monthly. This is due to the fact that shorter pay cycles allow less time for payroll officers to process things.
Focussing on the retail sector, the combination of shorter pay cycles with the complexity of the General Retail Industry Award produce a recipe for underpayment exposure in small and large retailers alike.
Whilst these challenges aren’t helping retailers get pay right, it is too easy to blame the ‘system’ for getting it wrong. Employees will not care if it was a small unintentional mistake. They have a legislative right to how much they get paid and when. Retailers have an obligation to ensure they make sure they get it right when it comes to pay.
Getting pay right
It is imperative that retailers detect problems today to avoid becoming tomorrow’s news. A good way to start is with a payroll audit. This practice is conducted to ensure employer compliance with employee record and data management. Moreover, internal auditing is run to ensure that records are accurately and properly maintained and to identify potential problem areas – such as underpayment – before they manifest in full.
Depending on the company size, a regular audit could take place every six to 12 months to ensure the business remains compliant with industrial relations regulations.
Since payroll is a process involving complicated calculations, manual payroll systems may no longer be the best way to get things done efficiently and accurately. With the rise of automation, retailers can reduce manual and time-consuming tasks, such as data entry, which are often the cause of errors. It also assists in keeping pay information up to date and compliant with the latest awards and regulations, meaning retail payroll teams can spend more time enhancing the employee experience, rather than trying to rectify errors before they make the headlines.
For retailers still in the growth stage without the resources for a dedicated payroll department, outsourcing to the experts is another great way to guarantee payroll is error-free at all times. Experts are not only able to get the basics right, but also provide insights and updates from a legal and organisational perspectives.
It’s not enough for retailers to get pay right often – it must be right every time. Through automation or outsourcing, retailers will have one less thing to worry about and can shift their focus onto innovative policies, such as implementing perks and benefits to enhance the employee experience.
More so than any other industry, employees are often the face of the retailer. Employees play a huge role in a retailer’s performance, just as accurate pay does in the employee’s life.
While retailers compete hard to attract and retain the best talent, mistakes in wage payments can easily cause employee dissatisfaction and churn, undoing all the great work an employer does in inducting and training their staff.
Accurate payroll not only fosters positive reputation and business performance but also creates a tighter affinity between the brand and its employees. Accurate pay is the foundation on which to build a better employee experience. One that boosts productivity, engagement and performance of employees.
So don’t risk being the next headline, make sure you get pay right and become a truly fair, engaging and aspirational home to your team.
Richard Breden is general manager of Ascender Cloud Services.