'Underpayments don't just erode employee trust but also lead to morale decline, dissatisfaction, and disengagement,' says expert
Amid growing reports of underpayments across Australia, employers are being encouraged to further value transparency to protect the workforce's trust and morale.
Matt Loop, VP and Head of Asia at Rippling, told HRD that employers can take proactive steps by "prioritising transparency, communication, and fair compensation practices."
"Openly address any concerns or questions employees may have and provide regular updates and feedback on performance and achievements, recognising employees' contributions and reinforcing their value to the organisation," Loop told HRD.
His advice came amid increasing reports of underpayments across major organisations over the past years, including Woolworths, Reserve Bank of Australia, Commonwealth Bank of Australia, Australian Catholic University, among others, which may be impacting employee morale and raise uncertainty in the workforce.
Consequences of underpayments
According to Loop, underpaying employees can lead to "potentially more severe and long lasting" ramifications for employers.
"Underpayments don't just erode employee trust by signalling an undervaluation of contributions, but it also leads to morale decline, dissatisfaction, and disengagement among staff," he said. "Individuals will often feel like their employer does not care about them - or their wellbeing - as much as it should.
"This can lead to organisations struggling to retain and attract good talent, and thus hamper their efforts for business productivity and competitiveness."
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In cases of underpayments, leaders must also work to address concerns upfront and show commitment to fair pay.
"Businesses must also ensure they are effectively communicating and demonstrating the steps the company is taking to limit the risk of errors taking place in the first place," Loop said.
Impact of IR reforms
Australia recently introduced an industrial relations (IR) reforms that seek to criminalise intentional underpayments committed by employers.
"The impending IR Reform changes are bringing a new level of scrutiny for organisations, and it is signalling a significant compliance risk for businesses," Loop said.
"Organisations must therefore ensure their operations are in good shape to keep up with these changes. A robust payroll system, coupled with an effective HR system, can mitigate errors and ensure compliance with legal regulations, expediting the detection and resolution of any issues that arise."
Simplifying payroll services
Research from Rippling revealed that 63% of Australian organisations employ three or more solutions to manage their HR and payroll, while another 37% are using five or more.
Nearly half (48%) of businesses are also still relying on manually inputting employee data, rising the risk of potential human error.
"Businesses should look to simplify and streamline their HR & payroll operations, where possible mitigating the chance of errors occurring," Loop said.
"Additionally, providing training and support for managers and HR personnel on proper payroll procedures can help prevent future errors."