Optimising Your Payroll: A Guide to Effective and Compliant Record Keeping

As an employer, maintenance of accurate and up to date employee records is imperative to the efficiency of your payroll management. Having good quality business records serves as a comprehensive archive of crucial employee information that not only ensures legal compliance with Fair Work requirements but also facilitates smooth payroll systems that will benefit the entire business.

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These obligations as per Fair Work’s requirements, encompass vital details such as employment contracts, entitlements, timesheets and roster data that safeguard both the employer and employee’s working agreements.

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Employers in all industries are required to adhere to these standard record-keeping obligations for smooth payroll operations and to mitigate any risks of potential non-compliance.

Common errors we have seen in payroll record-keeping

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Roster and timesheet data

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Workplaces are dynamic environments, subject to unforeseen changes such as sudden absences, workload fluctuations and emergency situations. As a result, rosters can deviate from their initial forecast. Failure to accurately capture these deviations in the long run within the payroll system can lead to disparities in entitlement calculations. This distinction between rostered hours and real time shift activity is a defining factor in determining various entitlements. 

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Inconsistencies between time and attendance systems and payroll systems

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Discrepancies between time and attendance systems and payroll systems can result in errors when these systems do not align seamlessly.

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Inaccurate data entry and misalignments stemming from manually overriding your payroll systems but not your time and attendance systems can lead to varying shift activity and wage calculations.

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This affects the long term accuracy of your payroll records and can be challenging to generate evidence to prove that all data across both systems were captured accurately.

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Failing to accurately record breaks and break duration

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Failing to accurately clock in and out of both unpaid and paid breaks can result in significant record keeping discrepancies. When employees neglect to record their breaks properly, it can be challenging for employers to calculate worked hours, entitlements and wages.

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In a regular 8 hour shift, breaks can account for 4% of the time and having the evidence to prove that they actually happened can make a difference when it comes to paying wages. Overtime, penalties and an employee's ordinary hours can also affect what their entitlements make look like.

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Incomplete payroll records 

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Relying on incomplete records and only having partial employee shift information is another common issue that leads to long term record-keeping errors. When vital details like higher duties, break durations and changes to an employee's type of employment are missing, accurate calculation of wages, overtime and benefits become difficult. 

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Inconsistencies that derive from these partial records can inadvertently lead to overpayments or underpayments that can back date to many pay cycles. 

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Why is it important to avoid making these errors 

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All of these errors can put employers at a risk of being unable to defend any potential claims for an underpayment of wages and civil penalties. The Fair Work Act also outlines that in situations where a claim for an underpayment is submitted, the onus falls onto the employer to disprove the claim. Meaning that if an employer does not have adequate time and wage records, including payslips, it can be very difficult to prove compliance. 

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Best ways to mitigate the risk of these errors occurring 

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Collect more data than actually required 

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Collecting more data than required can serve as a strategic safeguard against common errors. These should include data from special arrangements that employers have with employees and is essentially everything from working patterns to rostered days off included in the employment contract. 

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An example of this is an annualised wage arrangement where an employee and employer agree to set working patterns and anything above that, such as overtime hours should be recorded. Collecting these arrangements in your records can provide valuable insights for efficient wage allocation and preparing rosters that work around these arrangements.

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Internal spot checks

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Implementing spot checks that involve periodic and random reviews of payroll records can help identify potential errors before it is too late. Businesses can examine subsets of records to detect outliers such as incorrect hours worked or missed overtime efficiently. These spot checks will act as an early warning system, enabling timely correction to systems and reducing the likelihood of systematic errors that will affect a larger number of the workforce.

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Ongoing reviews with an independent provider 

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One way that businesses can introduce better record-keeping is through conducting regular checks of payroll records with a third party. These checks act as a form of external auditing that aids in identifying errors, inconsistencies or potential issues before they escalate into systematic issues. 

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