'Fundamental' payroll error leads to $6.5 Million in back payments for Disability NFP employees

A recent development involving a disability support services provider, exemplifies the critical need for payroll compliance within organisations, particular those within the not-for-profit (NFP) sector. In this instance the provider has now processed back-pays to over 1,000 staff totalling more than $6.5 million including interest and superannuation under an Enforceable Undertaking (EU) with the Fair Work Ombudsman (FWO).

The breaches in payroll compliance were self-reported in June 2021 after the underpayments were identified following a merger in 2018. An audit revealed deficiencies in the payroll system, with inadequate technology and manual processes allowing the errors to build up over a four-year period.

Most of the underpayments involved the provider failing to pay part-time employees with their minimum agreed hours and failing to apply overtime rates where an employee worked more than six consecutive days of ordinary duty without a 24-hour break.

The FWO revealed that the underpayments ranged from $5 to over $230,000, with most back-payments falling between $1,000 and $2,000.

Whilst headlines involving systemic underpayment of staff generally involve high-profile listed and private companies, the NFP sector is not immune from the risks associated with legacy payroll systems, manual processes and failing to seek advice on award interpretation matters.

The Deputy Fair Work Ombudsman recommends that all employers allocate the necessary time and resources to ensure that they fulfill their employees' lawful entitlements.

At Prosperity, we offer comprehensive solutions encompassing outsourced payroll services and payroll audits. These services are designed to help organisations navigate the intricacies of Australia's complex employment laws, reducing the risk of legal disputes and penalties.