This was published 4 years ago
Rise of the machines: Is trust in payroll software disastrous?
By Emma Koehn
An error in the payroll system: it's the excuse made for a range of underpayment cases across Australian businesses this year and according to experts, that excuse could emerge again given the country's over-reliance on digital processes.
Payroll, accounting and bookkeeping software is now a multi-billion dollar industry promising companies of all sizes a simple way of reducing the time they spend on paperwork each year.
Aaron Wittman (left) and Troy Brown (right), founders of accounting risk startup Xbert.
Experts have warned these promises are overinflated at best and could cause serious issues in an era where companies have been under-investing in their in-person payroll compliance for years.
This is because systems are only as good as the data fed into them, and many smaller operators in particular are deciding what to pay their staff without employing the help of experts.
"When you read the fine print, payroll solutions are really good at dispersing money. They're quite good at doing the tax calculations. What they're entirely useless at is knowing what to pay people," said partner in charge of people advisory, employment and expatriate taxation at BDO, Ben Renshaw.
Mr Renshaw said while digital payroll systems were improving, Australian businesses simply must have professionals checking the input of data to ensure the right amount is paid.
There are few excuses for this, he said, with less and less sympathy from the public for errors that are not picked up and corrected.
"What I’ve seen is a high level of trust in payroll solutions that thinks they will fix the problems. I think this has been aided and abetted by payroll providers, because that [the offer] sounds really good."
Ben Renshaw, partner in charge of people advisory, employment and expatriate taxation at BDO.
In the wake of large underpayments scandals throughout 2019, payroll professionals expressed their frustration that businesses are unwilling to invest in compliance in order to get their payments right and are willing to blame systems if they make a mistake.
"A payroll platform is just like Excel — I can use Excel but if I get it wrong, Bill Gates isn't going to be responsible," chief executive of the Australian Payroll Association, Tracy Angwin, said.
There is no payroll product in Australia that correctly calculates long service leave.
Tracy Angwin
Ms Angwin said while many businesses did have robust payroll processes, there was a refusal to admit that getting staff pay right requires human oversight.
"For example, there is no payroll product in Australia that correctly calculates long service leave," she said.
Regtech businesses have been working on software that will identify risks among the large volume of digital payments and accounting information.
Aaron Wittman and Troy Brown have recently launched Xbert, a tool designed to integrate with cloud accounting platforms that can pick up irregularities or risks within a company's books and notify the founders.
Tracy Angwin, chief executive of the Australian Payroll Association.
The business is just starting to generate revenue after a $1.5 million investment from the founders and high net worth individuals. Mr Wittman and Mr Brown started the company after both were burned by accounting concerns that went unnoticed while running previous companies.
"It analyses data every hour to look for patterns or anomalies," Mr Brown said. This includes irregular transaction records or other financial risks.
While the Xbert team are now turning their minds to payroll compliance, the founders say this won't be their main focus, as there are too many variables at play to create reliable tools.
"We’re working on it now to work about how we implement baseline metrics on underpaying people," Mr Wittman said.
Digital payroll processors also hold no responsibility for pay discrepancies.
Both MYOB and Xero, the nation's largest players in small business accounting and payroll software, said systems had limited ability to recognise common errors and that users must employ counsel from accountants and bookkeepers to ensure they are doing the right thing.
"Our terms reflect the legal requirement that responsibility for payroll is with the employer. Engaging with an accountant or bookkeeper is advised to ensure the small business is fully across all compliance needs," an MYOB spokeswoman said.
"As with all technology, payroll software is only one part of the solution, and is only as accurate as the information entered into it, combined with the knowledge and experience of the user," said Matthew Prouse, head of industry at Xero Australia.