Wage Audits – Where to Get Started?
In today's ever-changing regulatory landscape, wage audits have become a critical component of business compliance. With increasing scrutiny on payroll compliance and the introduction of wage criminalisation laws, ensuring your organisation meets its obligations has never been more important. But where do you start? This guide will walk you through the key steps to conducting a wage audit, highlighting best practices and leveraging technology to streamline the process.
What is a Wage Audit?
A wage audit is a systematic review of payroll records, employee classifications, and wage payments to ensure compliance with employment laws and regulations. It helps businesses identify discrepancies, rectify payroll errors, and mitigate the risk of penalties or legal action.
Regular wage audits are essential for organisations of all sizes, as changing legislations can impact how wages should be calculated andpaid. Companies that fail to conduct payroll audits risk financial penalties, reputational damage, and, in some cases, criminal charges under wage criminalisation laws.
Why Are Wage Audits Important?
- Compliance with Employment Laws – Changing legislations mean that businesses must stay updated with wage rates, penalty rates, and entitlements.
- Avoiding Legal Consequences – Wage criminalisation laws are being enforced more strictly, meaning businesses that underpay staff can face significantfines and even prosecution.
- Financial Accuracy – Payroll audits help identify and rectify overpayments or underpayments before they become costly issues.
- Maintaining Employee Trust – Ensuring accurate wage payments fosters a positive workplace culture and prevents disputes with employees.
Steps to Conducting a Wage Audit
1. Gather Payroll Data
Start by collecting all relevant payroll records, including timesheets, pay slips, superannuation records, and tax filings. Ensure your HR systems and payroll technology are up to date and accessible.
2. Review Employee Classifications
Misclassifying employees (e.g., full-time vs. casual) can lead to incorrect pay rates. Verify that all employees are correctly classified based on their roles and entitlements under the relevant modern awards or enterprise agreements.
3. Check Wage Rates & Allowances
Cross-check employee wages against Fair Work requirements, industry awards, and agreements to ensure compliance with minimum wage laws. Factor in penalty rates, overtime, and allowances.
4. Verify Payroll Deductions & Superannuation
Ensure all deductions (such as tax and salary sacrifices) are lawful and that superannuation contributions have been made at the correct rate.
5. Identify and Rectify Discrepancies
If errors are found, take immediate action to rectify them. This may involve back-paying employees and updating payroll systems to prevent future issues.
6. Implement Payroll Compliance Technology
Utilising HR systems and payroll audit tools can streamline the auditing process, reducing the risk of manual errors and ensuring ongoing compliance. Technology payroll solutions, like Subi, help businesses stay ahead of regulatory changes.
How Often Should Wage Audits Be Conducted?
Wage audits should be performed at least annually, but businesses in high-risk industries, such as hospitality and retail, may benefit from quarterly reviews. With wage compliance laws tightening, more frequent payroll audits ensure ongoing compliance and reduce legal risks.
Need Assistance?
Conducting a thorough wage audit can be complex, but ensuring payroll compliance is essential to avoid penalties and maintain business integrity. If you need assistance, please reach out at hello@subi.au.