New payroll compliance penalties boost tech adoption in Australia, says Yellow Canary

A new survey by payroll technology company Yellow Canary has revealed that only 22% of Australian businesses have adopted proactive payroll compliance technology. Yet others may follow as they seek to reduce the legal and business risk of underpaying employees.

Intentional underpayments of employees became a criminal offense on January 5 following amendments to Australia’s fair work laws, with individuals and businesses now potentially liable. Although unintentional errors do not result in criminal penalties, Yellow Canary estimates that underpayments represent between 1% and 3% of total personnel costs across the market.

The yellow canary survey of 533 compliance officers in Australia found that the growing risk linked to underpayments is encourage more technology buyers to turn to proactive payroll compliance tools:

• 23% plan to adopt technologies in the next two years.
• 21% of companies plan to implement these tools in the next 12 months.
• 17% say they are satisfied with manual compliance processes.
• 15% were curious about more proactive payroll technologies, but had no plans to implement them.

“The introduction of the Closing Loopholes Acts, including the criminalization of wage theft, marks a pivotal moment for Australian businesses,” Marcus Zeltzer, chief executive of Yellow Canary, said in the report.

“Our research reveals that while many companies are making payroll compliance a top priority, a significant number still rely on flawed manual processes or have not conducted thorough reviews. »

SEE: Best Practices for Maintaining Payroll Compliance

Payroll teams fear not paying staff correctly

Nearly half (48%) of those surveyed by research firm Lonegran Research on behalf of Yellow Canary said they had won payroll compliance a top priority before the “Closing the Gaps” law.

However, 93% of local businesses with at least 50 employees still reported that they had at least one area of ​​concern regarding potential employee underpayments in their organization when the law took effect. Additionally, 17% expressed uncertainty about whether their staff would be properly remunerated, while 19% suspected an underpayment problem may exist, but I have not confirmed it.

Several key drivers of salary underpayment problems were identified in the research report:

• 39% of respondents were concerned about keeping up to date with legislation and obligations, demonstrating the complexity of remaining compliant in a changing regulatory environment.
• 37% cited concerns about a lack of internal communication, noting that collaboration and information flow between departments reduces errors and inconsistencies in processes. payroll process.

Another 32% were concerned about time and resource constraints related to payroll audits and historical reviews. Meanwhile, the reliability of payroll software to ensure compliance was a concern for 31%as is aligning roster management or time and attendance processes, which are often managed through system integrations.

SEE: 8 Best Payroll Software for Australian Businesses

Only 7% of respondents said there was no cause for concern about possible underpayments. However, Yellow Canary said it was unclear whether this reflected genuine assurance or a lack of awareness, given that it had seen some non-compliance among 100% of its clients during its monitoring work. review of $70 billion in wages.

Proactive compliance and AI could improve the payroll dashboard

Australia has experienced widespread problems with underpayments – affecting large private and public sector organizations – in many cases due to Australia’s complex payment allocation system.

The Yellow Canary report reveals that many employers still rely on “less reliable” methods:

• 31% still perform manual audits with spreadsheets.
• 32% review pay code configurations.
• 37% use sampling for payroll audits.

SEE: A Step-by-Step Guide to Doing Payroll (The Right Way)

“While businesses may be confident in their manual methods, these processes are flawed, error-prone, limited in scalability, and unable to keep pace with the increasing complexity of compliance,” the report states.

Adopting proactive payroll compliance technologies should help reduce the problem by replacing more manual review processes with regular technical audits of workforce payroll data.

AI integration could support these efforts – but some companies remain skeptical

More than half (59%) of Australian businesses with 50 or more employees are optimistic about the potential of the introduction artificial intelligence in their payroll compliance frameworks going forward.

AI is not yet commonly used for payroll compliance in Australia, but the report says the evolution of the technology shows “great potential for integration into existing processes”.

For example, AI can be used to analyze payroll data patternsand identify anomalies (such as incorrect pay codes, underpaid employees, or misclassifications) to provide payroll teams with real-time insights.

However, 27% of respondents remain either skeptical about AI’s ability to improve payroll compliance or believe AI will introduce more challenges and make payroll processes more complex in the future.

“Companies face challenges such as integration issues, data privacy concerns, and resistance to change before widespread adoption (of AI),” the report said.