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Several major organisations, including the likes of 7-Eleven, Melbourne University, and Woolworths, have been making headlines over the last few years for allegedly underpaying their staff. While the details behind these breaches may differ, once a story like this hits the headlines, the intent hardly matters. Whether malicious or a mistake, the reputational and financial damage has been done.

What the public rarely understands is how difficult it is to calculate payments and entitlements – and the bigger the organisation, the more complex the process. Manual processes are still a big part of HR and payroll, which can increase the chance of errors occurring.

Whether underpayment or overpayment, the complexity of these processes means you can’t always stop errors from occurring. However, more businesses are looking for ways they can better monitor their payroll processes to limit the consequences of errors and get ahead of potential issues.

Turning to AI and automation-enhanced software as a second layer of defence, some organisations are gaining clearer visibility into HR and payroll processes and systems, proactively managing financial oversights, empowering teams to rectify problems and ensuring wage and payroll compliance.

How hard is it to get payroll right?

It is certainly not as easy as it may seem to calculate the correct financial entitlements for every single employee in an organisation. An employee’s final pay is made up of not just one lump sum, but an accumulation of varying entitlements, including (but not limited to):

  • base salary
  • superannuation
  • leave entitlements
  • commissions
  • expenses
  • overtime

Errors rarely occur in base salary – as long as it’s set up correctly during onboarding, it will automatically remain correct at each pay cycle. It’s the variability of other factors that is usually where the danger lies. The discrepancy often lies between what an employee is entitled to, and what they are actually receiving.

The reliance on manual data entry for onboarding processes into payroll applications is the most common cause of errors. Employee onboarding requires a range of information to be inputted into HR systems – everything from date of birth and tax file number (TFN) to salary and entitlements. An incorrect entry that goes unnoticed will potentially see the error continue for the lifetime of the employee’s tenure within the organisation.

Suddenly, it becomes easier to see why the average organisation loses 2%-5% of its annual payroll costs due to errors and fraud.

You can’t stop what you can’t see

The problem lies not in the initial incorrect input – all processes, after all, are prone to errors. It is the inability to notice or be notified of the error that leads to the compounding consequences.

And these consequences go beyond underpayment – overpayment can also occur. It only takes something as simple as a misplaced decimal point in an expense claim to cause a significant overpayment that, legally, could take years to recover through repayment agreements.

This shows the importance of catching errors early if they do happen and enabling teams to rectify them quickly. Something as small as a decimal point can be all but impossible for a human to detect – which is why more organisations are turning to AI and automated technology to act as their last layer of defence. Unlike human teams, software can run 24/7 to check for discrepancies and alert relevant roles.

Despite the commonality of errors and the media headlines, proactivity in financial monitoring is still not common. However, some organisations are seeking to improve visibility across financial functions, including payroll, to better control their costs and fill gaps in their processes.

Getting ahead of errors: Proactive monitoring in action

Over the last few years, one large retail wholesale business has been considering the need to gain more visibility and control over their financial functions. They had recently acquired several other businesses, which increased the number of systems being utilised and led to a lack of standardisation and data consistency.

They decided they could benefit from implementing monitoring technology to identify any errors in their processes and help reduce inaccuracies  across their growing business. They brought in Satori, an automated transaction monitoring service, to run practical tests across payroll and HR functions to make sure employee entitlements and allowances were correct. This meant both ensuring the correctness of employee information and checking the accuracy of transactions and payments.

Satori immediately identified errors in the system, including instances of incorrect and inconsistent master file data, as well as instances of employees receiving allowances they weren’t entitled to.

The continuous monitoring delivered by Satori ensures this retail wholesale business can:

  • Make sure that processes are running as they should be
  • Provide the confidence that if there is an issue, it will be picked up
  • Ensure that when an issue is identified, it’s dealt with appropriately
  • Provide evidence and peace of mind to the management and executive teams

Monitor, identify, rectify & comply

You can’t fix what you don’t know is broken – and the complexity of payroll and HR systems makes it almost impossible to identify gaps. The reality is that many businesses are currently operating with errors in their payroll system and have no idea.

The goal doesn’t have to (and shouldn’t) be complete error prevention. Fully automating HR processes isn’t required. The goal should be real-time visibility and awareness – if an error is made today, someone in authority to fix it should know by tomorrow.

You can achieve this by monitoring against set frameworks and regularly running tests to ensure reality reflects expectations. This will ensure errors aren’t going undetected, and there’ll be no big surprises further down the track.

Satori is a Software as a Service that offers automated, continuous compliance assurance over all Payroll transactions and HR master files. The workflow manages exception output to ensure follow-up in a timely manner and that each exception is investigated and closed out with a defined issue, action, and root cause. Dashboards also provide management with real-time visibility on what issues are occurring and their root causes, enabling opportunities for process improvements.

To learn more about how Satori supports HR and payroll teams and to see it in action, click here.

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