A business case of how the dVT Group conducted a comprehensive review of a client’s payroll, identifying potential discrepancies and errors and provided recommendations for corrective actions and improvements in payroll calculations.

By adopting our recommendations and suggested technologies and methodologies, the client gained valuable insights into their payroll accuracy and compliance with payroll regulations. This proactive approach has positioned the client in a stronger position to comply with industry standards, safeguarding them against legal risks and enhancing overall operational effectiveness. 

Overview

In Australia, directors face significant legal risks if employees are not paid in accordance with industry standards, as outlined by the Fair Work Act 2009 and related legislation. Directors can be held personally liable for breaches of employment laws, including underpayment of wages and entitlements, if they were involved in or aware of such breaches. They are responsible for ensuring that all employees receive the minimum wage, overtime, penalty rates, and other entitlements as specified in modern awards or enterprise agreements. The Fair Work Ombudsman actively enforces these standards, and non-compliance can result in substantial fines, back payments, and even criminal charges in severe cases. Recent legislative changes have strengthened penalties and expanded the scope of director liabilities to ensure greater accountability and protection for workers.

Situation

The dVT Group was engaged to carry out a comprehensive review of their payroll calculations and spreadsheets. The objective of the review was twofold:

1. To ensure accuracy and compliance with payroll regulations and industry standards.
2. To identify any discrepancies or errors in the payroll calculations and provide recommendations for corrective action.
   
   

The client approached dVT due to our reputation for expertise and professionalism, backed up by positive recommendations from industry peers. By partnering with dVT, the client sought to leverage our specialised knowledge and experience to address their payroll review needs effectively. The client operated as a 24/7/365 business, which meant that there was a complex range of working hours, staff levels, penalty rates and award conditions applicable to different employees, and all these had to be taken into account when reviewing the internal calculations.

Actions

dVT conducted two separate reviews covering multiple stores operated by the client. A sample of employees was randomly selected from these locations. The review included the following key areas:

1. Review of Spreadsheets: dVT obtained and analysed spreadsheets containing timesheet and payroll data provided by the client. A sample of spreadsheets from different locations was examined to assess the accuracy of calculations.
2. Formulae Analysis: dVT tested and commented on the formulae used in the spreadsheets for calculating appropriate hourly rates. This involved verifying the logic and consistency of formulas across different columns.
3. Hourly Rates Check: The accuracy of hourly rate calculations was verified against industry awards and relevant regulations. Any discrepancies were noted and analysed.
4. Calculation Accuracy: dVT checked the accuracy of calculations for annual leave, leave loading, and standard pay for the selected employees. Variances were identified and documented for further investigation.
5. Comparison with Payroll Data: Employee details such as employment dates, employment category, and hourly pay rates were compared with the payroll data to ensure consistency and accuracy.
6. Variance Analysis: Overall variances between calculated amounts and employee wages were analysed. Any significant discrepancies were investigated and explained.
7. PAYG Withholding and Back Pay Calculation: The accuracy of PAYG withholding and back-pay calculations was tested and verified.
   
   

Tools and Methodology:

To conduct the review, dVT utilised various tools, expertise and methodologies, including:

1. Spreadsheet analysis software for examining payroll spreadsheets and formulas.
2. Industry award databases and regulatory guidelines for verifying hourly rates and compliance requirements.
3. Statistical sampling techniques for selecting a representative sample of employees from different stations.
4. Comparative analysis methods for comparing calculated amounts with actual wages and identifying discrepancies.
   

Outcomes

The review conducted by dVT identified several areas of improvement and potential errors in the payroll calculations. These included inconsistencies in formulae, hourly rate discrepancies, and annual leave calculation variances. Recommendations were provided to the client for corrective action, including back pay adjustments and formulae revisions.

Despite minor discrepancies, overall variances between calculated amounts and actual wages were minimal. dVT concluded that most errors were attributable to recording issues in timesheets rather than inaccuracies in payroll calculations. We suggested that the client use payroll software and attendance systems suitable for their industry, which will ensure more accurate recording of timesheets rather than relying on manual systems. Our recommendations were based on our in-depth understanding of available technologies, compliance requirements, and the importance of efficiency and accuracy in timekeeping processes within the client’s industry.

The Result

Adopting our recommendations reduced the risk of substantial fines and claims against the company and its directors, thereby reducing the risk of an adverse financial impact on the business. The review conducted by dVT provided valuable insights into the accuracy and compliance of the client’s payroll processes. By identifying areas for improvement and offering recommendations for corrective action, dVT assisted the client in ensuring accuracy, compliance, and efficiency in their payroll operations.

Addressing the identified issues and adopting suggested technologies and methodologies have put the client in a stronger position to comply with industry standards, thereby safeguarding against legal risks and enhancing overall operational effectiveness. In a sensitive area like human resources and payroll, mitigating the risks of industrial action or complaints is crucial. The cost of undertaking this exercise had real value for the client by reducing potential legal and operational risks.

If you would like to learn more about our approach or how we can help your company overcome similar challenges, please get in touch at (02) 9633 3333 or by email at mail@dvtgroup.com.au.

dVT Group is a business advisory firm that specialises in business turnaround, insolvency (both corporate and personal), business valuations and business strategy support.