24th September, 2018

Payroll: five of the hidden risks to your business

Payroll is often thought about as that boring function that’s basically taken care of by the HR team or accounts, but not getting it right carries risk to security, reputation, or loss of key IP.

It’s odd that a function which is so crucial to actually getting people paid is quite often thought about as an afterthought for a business.

Not enough attention is paid to getting payroll as smooth as possible.

Not only does a well-functioning payroll department make sure everybody’s paid on time (which leads to happier workers), getting it wrong can have some dire consequences.

1. Security

Your payroll system houses all sorts of sensitive information on both your business, and your employees’ financial details.

So it’s important to know what security procedures are in place for your organisation.

For example, imagine your payroll officer responds to a phishing email purportedly from the CEO of the organisation asking for the key details of another employee.

It sounds far-fetched, but it’s actually happened. To Snapchat.

So having both a good technology solution and good payroll practices in place is vital.

2. Non-compliance

You may have read a lot around businesses underpaying employees of late, and rightly so it’s an issue which is getting a lot of attention.

But for every business which is underpaying staff because they want to cut a few corners, there’s one which is doing so because it forgot to update its software and is paying under old rates.

For example, earlier this year the minimum wage in Australia increased – are you sure your payroll software caught that?

Meanwhile, business with 20 or more employees now need to pay their employees through an STP-enabled solution.

While we’re yet to see businesses pinged for non-compliance, you can bet that at some point the ATO’s patience will run out.

So, better to have a solution which automatically updates with all the latest compliance changes.

3. Data loss

It’s always important to have a backup in place, and this is doubly important for payroll.

If disaster strikes and the server or hard drive where your payroll information was stored, you’re up some sort of creek without a paddle.

Without that information, people can’t get paid – and people don’t like it when they don’t get paid.

The first thing you should do is have a backup plan for your payroll data, and then think about what would happen if your main data storage option was wiped out – would you be able to recover the data?

4. Key personnel risk

Payroll makes the business world goes around – there’s no argument there. If people don’t get paid, then they’re not turning up for work.

But many organisations basically leave payroll in the purview of a few people within one department of an organisations, and that’s a danger.

What happens if those people leave the organisation? Is there a plan for handover of the information required to keep payroll functions in play, or will processes fall by the wayside?

Organisations also need to think about documentation, so that if there is a gap at least there’s some kind of guide to keep payroll running smoothly.

5. Fraudulent activity

It’s an uncomfortable truth, but a lot of fraud is committed through the HR department.

In fact, according to a 2014 PWC report looking at company fraud [PDF], HR fraud accounts for 13 percent of all fraud suffered by Australian companies over a 24 month period.

It means that every payroll department not only needs robust processes in place, but also a robust oversight process.

Dealing with payroll pain? Head to to make it a thing of the past