The Key Payroll Challenges for NZ business – Part 2

Personal Accountability

In November 2015, a Parliamentary Select Committee reviewed proposed changes to the Employment Standards Legislation Bill. Clause 95 is of specific concern as it proposed additional accountability to “officers” of a company making them personally responsible for systems set up and calculations that do not provide employees with their full holiday entitlements.

Even where payroll services have been outsourced, the employer is accountable for compliance with all employment legislation and standards.

The Act currently remains unchanged but this review signalled an intent to increase accountability of “officers” across a wide spectrum of organisations similar to the recent Health and Safety Act.

Businesses need to be vigilant and understand their liability for interpretation and delivery failures and become pro-active in lobbying to ensure the scope of the breach of conditions is clear and does not become broader.

Implementation Failure

The high profile, troubled implementation of Novopay at the Ministry of Education has had a considerable effect on the confidence of employers to consider replacing legacy payroll systems. The experience of New Zealand Education, Queensland Health and New Zealand Post payroll implementations offer valuable experience and learnings.

The impact of these failures is more than financial, it affects people’s lives and strains employer/employee relations. The Ministerial Inquiry into Novopay notes weaknesses in governance and leadership that allowed the project to go live with significant risk and notes a lack of subject matter expertise.

Similarly, the Queensland Health Payroll System went live with disastrous outcomes. A Commission of Inquiry led by Commissioner Chesterman described the purpose of the enquiry:

“To determine why such large amounts of money have been lost to the public, whether anything might be recovered; and why such distress was inflicted on the Queensland Health Workforce.”

Commissioner Chesterman recognised that as well as the financial cost of a protracted, over-time and over-budget project, implementation issues have placed pressure on industrial relations and employee engagement.

Similarly, after the implementation of the payroll system at New Zealand Post in 2011, Union organiser Jo Gallagher commented in national media that:

“New Zealand Post has been sold a “dog” of a system. We had workers overpaid, underpaid, not paid, you name it, we had it. Team leaders were paying for their employees’ groceries and petrol to cover pay problems, while others faced the possibility of mortgage defaults. It’s quite distressing when you’re mucking around with people’s lives”.

Ongoing Changes to Legislation

Ongoing transformation of the tax system and the lengthy issues created by the difficult Holidays Act are examples of how legislation is organic and requires vigilance from employers. The Employment Standards Legislation Bill that came into force on 1 April 2016 is an omnibus bill that amends various pieces of legislation affecting employment relations and employment standards.

The overarching policy goal is to make workplaces fairer and more productive, for both employers and employees. The bill seeks to achieve this goal through the following three distinct policy areas:

• Expanding eligibility for the parental leave scheme
• Enhancing the enforcement of employment standards
• Prohibiting certain unfair employment practices that lead employees to bear disproportionate obligations compared to their employer

We have all read about the now illegal zero hours contract. Keeping up with such ongoing legislative changes by maintaining in-house expertise is challenging, even for large businesses.

Administrative Cost

Inefficient payroll administration carries significant underestimated and unrecognised costs and risks. Common in payroll are:

Pay Adjustments – a good indicator of quality and accountability

Incorrect or incomplete information received by payroll results in further payroll adjustments sometimes spanning over a period of months to correct.

Late and Retrospective Transactions

Late and retrospective payroll transactions undertaken by the payroll service due to inefficient business practices.

Off cycle and Additional Pays

Out of cycle payments due to service criteria being misunderstood, ignored or over-ridden

Lack of Automation

Timesheets still manually interpreted by payroll team members to process an employee pay decreases efficiency and often leads to poor quality outcomes.

Misunderstood Policies and Procedures

Poor or sometimes non-existent policies lead to potential non-compliance. Similarly, if procedures are not followed or misunderstood then poor practice and interpretation of pay becomes the norm leading further to non-compliance.

A payroll issue resolved efficiently whilst avoiding re-work is not just a payroll success but:

• Lowers business risk
• Lowers business cost
• Increases productivity and increases the positive profile of the service
• Ensures accurate and insightful information outputs from the payroll function.

Knowledge Is Power

“I am prepared for the worst, but hope for the best” Benjamin Disraeli

Comprehensive and regular specialist review of your payroll system functionality, system use and related business processes ensures problems are caught early.

The benefits of specialist review of your workforce management, HR and payroll functions provide transparency and insights to the business, highlighting:

• Weakness in controls needing improvement and strengthen financial rigour
• Poor, unclear or lack of policies to be enacted to provide good guidance
• Inefficient business process requiring good change management to improve business outcomes
• Areas of non-compliance needing attention

A focused and comprehensive review provides you with the insight needed to determine the right course of action for your business.