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Avoid employee underpayment woes with better planning and forecasting

03 Apr 2020

Article by Board International senior solution architect Chris Hannan.

The issue of staff being underpaid by employers has captured media attention in recent months. Retailers, restaurants and even the ABC have all been found significantly short changing many of their employees.

Clearly it’s an issue that needs to be addressed as soon as it’s discovered and staff fully paid any monies owed to them. Steps need to then be taken to ensure it doesn’t happen again.

However, organisations need to realise accurately paying people for the hours they work is only part of the issue. You also need to be able to plan for the future and ensure you have mechanisms in place to deal with constantly changing workforce numbers and patterns of employment.

It’s an issue that’s becoming particularly important as growing numbers of salaried workers begin to be paid extra for overtime and irregular shifts. Where the cost of their employment would previously have been a known and constant amount, it’s now more likely to change on a regular basis.

Accurate tracking and forecasting of wage payments is also becoming a growing issue as the number of casual and part-time workers rises. While calculating payments to full-time staff working regular hours is straight forward, tracking what’s owed to large groups of people working irregular numbers of hours certainly isn’t.

Improving accuracy

As organisations come to understand what is required to ensure the accurate payment of salaries and wages to all staff, they find there are four essential steps that must be taken. They are:

1.    Tracking actual costs: The first step is to have mechanisms in place that ensure all hours worked are recorded, together with any relevant penalty rates and other payments. While this may seem obvious, recent widely reported incidents show it is too often not the case. Check the methods being used within your organisation and make any changes that might be required.

2.    Accurate budgeting: Organisations also need to have the ability to accurately budget for these costs to ensure they can be covered. All too often we see stories about businesses that are forced to close their doors because they were unable to meet their wage and salary obligations. Accurate budgeting is vital to ensure that there are no unforeseen expense hikes that can’t be afforded.

3.    Future planning: Once the systems are in place to accurately track current wage expenses and budget for the future, the next step is to run scenarios to determine the effect of any changes that might be implemented. What would be the wage cost impact of opening our restaurants two hours earlier each day? What if we changed the manager / employee ratio from 15:1 to 20:1? What happens if we decide to open our chain of stores on public holidays? Running scenarios such as these will clearly show the impact before any changes are actually made.

4.    Review offerings: Armed with this information, the fourth step is to review the portfolio of products or services offered by your organisation. This is important because anticipated changes in wages overheads may make some offerings uneconomic. It is far better to change the mix on offer rather than being forced to retrench staff or even close the business.

Models and scenarios

The bottom line is that planning and forecasting are vital when it comes to effectively managing wage and salary requirements within an organisation. Failure to get these right can result in incorrect payments, aggrieved staff, and unwanted public attention.

By building models and running scenarios before changes are made, the impact of planned alternations can be ‘road tested’ before being put into action. This removes much of the unknown and means that any changes made will have a net positive impact on the organisation.

Such models and scenario testing is particularly important in larger organisations where even relatively small changes to staffing or rosters can have a significant cumulative effect. Making use of relevant software tools to support the process is the best approach.

Making the effort to accurately track and record existing wage commitments as well as thoroughly plan for future changes will ensure your organisation doesn’t become the next wages underpayment scandal headline.
 

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