Two in five Australian SMEs admit to payroll errors, as wage theft criminalisation looms

Almost 40% of small Australian businesses admit to making a payroll error in the past two years, data from workplace management platform Rippling shows, exposing the compliance challenges facing local businesses ahead of new wage theft criminalisation rules.

Citing a survey of 150 payroll managers at businesses with between 5 and 49 employees, Rippling says 39% of respondents copped to a recent payroll error.

Under- and overpayment was the most common type of payroll error, accounting for 57% of mistakes.

The data does not break down how many businesses specifically confessed underpayments.

A further 27% confessed to late payments, 17% said payment errors resulted from the misgrading of an employee, while 8% revealed they had missed superannuation payments due to their workers’ super funds.

The data arrives months after the first Closing Loopholes legislative package passed into law, clearing the way for wage theft criminalisation at the federal level.

Those changes won’t come into effect any time before January 1, 2025; small businesses that adhere to a voluntary code of compliance, which is still under development, will be spared from criminal penalties in underpayment investigations.

Nevertheless, the Rippling data points to an uncomfortable gap between today’s regulatory framework and the actual performance of many small businesses.

“Payroll errors can be hugely detrimental to employee morale and damage company reputation, so it’s imperative that companies do all they can to limit the risk of human error taking place,” Matt Loop, Rippling’s VP and head of Asian operations, said in a statement.

Rippling — a newcomer in the Australian market — has good reason for unearthing that data.

It claims its all-in-one payroll, HR, IT, and finance platform will be capable of shepherding business users through Australia’s complex regulatory environment, and will adapt to changes like the incoming wage theft criminalisation reforms.

That help might be needed, as the Rippling data also shows two in five small businesses struggle to keep up with changing legislation and compliance obligations.

But Rippling’s promise has not gone undisputed.

Before publicly turning his ire to Australia’s superannuation giants, Employment Hero CEO Ben Thompson argued the American-based Rippling would struggle to adapt to Australia’s complex employment rules and frameworks.

Rippling itself has pledged a multi-year investment in Australia, and has built its Sydney team to 30 people, setting down roots in a market with vastly different regulations than its home nation.

SmartCompany has contacted Loop for further comment on the data.