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Wage Theft – What is the real cause?

A regular habit of mine on Saturday mornings, after I have completed my morning exercise routine, is to go to one of my favourite cafes and have a cooked breakfast, drink some wonderful coffee and read the weekend edition of The Australian Financial Review. Yes I admit, I am a coffee snob …

This week there was a front page article on payroll issues claiming that overpayments were as common as wage theft. The topic of wage theft is quickly becoming an issue for corporate Australia. Unions are accusing employers of wage theft and employers are claiming complexity of the workplace system as the cause. The article continues to say that:

“Claims of complexity are set to increase with rules coming into effect on March 1 that will require employers to return to Bundy clock style systems to record start, finish and break times of salaried workers and to conduct regular pay reconciliations.”

There is no doubt payroll system implementation can be difficult: the Queensland Health payroll implementation demonstrates this very clearly. So why does this happen? In my opinion it is because:

  • Awards can be complex and in order to correctly interpret the myriad combinations of conditions for the vast number of employees a firm has, can be enormous. To get this right takes very detailed and structured testing procedures to ensure every possible combination of scenarios is tested and proved to be correct. This takes time and depending on the complexity, a LOT of time and effort.
  • This testing also requires the effort from highly skilled people who understand the awards. Releasing these highly qualified people from their day to day jobs to perform this testing is often something companies do not want to do.
  • Technology implementations of this nature are complex and can be expensive to get right.
  • Executives are hesitant to spend the type of budget or take the time (which equates directly to cost) required to get this right. Software sales people of course will not or do not highlight the real costs involved for fear of losing the sale should this become obvious and unpalatable. 

It would seem that The Australian Payroll Association agrees as the article indicated that in their opinion the reasons for both under- and over-payments were the same: misinterpretation of industrial instruments and part-timers and casuals adding complexity to payroll. All things that need thorough testing before you go live.

As with all technology implementations of this nature, including ERP, the cost of getting this wrong can be massive. The article illustrates one not-for-profit over paid workers for 14 years costing in excess of $500,000 all because of one incorrect allowance, very quickly highlighting the need for detailed scrutiny in testing. It also very quickly highlights the amount of money that could have been spent to get this right. However, convincing some executives that an implementation that goes wrong can potentially cost this sort of money and often much more, can be a difficult task.

In my own experience with ERP, one project I was involved with where senior executives made a decision to go ahead with go live without thorough testing having been completed, in spite of my advice to the contrary, ended up with the company not being able to ship product for over a month while the issues were being worked on. This company eventually went into receivership after their reputation was severely damaged and they were unable to recover.

I outline this and a number of other sins in my recently published booklet, “The 14 deadly Sins of ERP implementation“. I received the physical books from the printers on Friday. It was a surreal feeling to actually see them on my kitchen table. If you would like a copy, please email me and I’ll send you a copy.

If you or anyone you know is looking:

  • To improve the way their business operates;
  • To improve the way they leverage their current system;
  • To replace their current system;
  • For unbiased advice;

give me a call for a confidential discussion on the best way to achieve this.

Until next month …



© David Ogilvie

overpayments, payroll, wage theft

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