One Payroll Error can be a Million Dollar Mistake

In February it was announced that Super Retail Group (SRG), the group that owns Rebel Sport, Supercheap Auto, Rays Outdoors and Macpay were found to have underpaid staff by $32 million over the last 6 years.

Underpaying staff can have a massive effect on your business, from your revenue to your reputation, unfortunately, this is something that SRG have learned the hard way. This error within the SRG shows how small human errors can have such a drastic ripple effect on a brand.

One error can affect everyone’s cashflow

This wasn’t SRG’s first payroll error, one year prior to this discovery it was found that 4,500 employees had been affected by underpayment errors when setting up and refurbishing stores. This is what sparked the review of SRG which revealed the major error; that management had been underpaid their penalty rates across 6 years.

When an incorrect payment occurs and is not rectified promptly, it continues to propagate until there is a much larger and more difficult issue that needs addressing. This affects multiple facets of business; employees are upset as they feel short-changed and unappreciated, they become disgruntled and can cause negative PR for the business, the business then owes a large sum of money to employees and the taxman that it may not be able to afford.

Payroll is a critical task which must be performed meticulously, if errors are not picked up it will cost your business greatly in the future. You will not only be required to pay your employees their outstanding wages, but you must also amend all tax and superannuation payments which were affected.

Your reputation is your revenue

When a major mistake in payroll occurs, not only do you lose the trust of your employees but you also affect the reputation you have built for your brand. Brand reputation is nothing to be overlooked, it can make or break a business.

Although customer purchasing behaviour is affected by other factors including purchase price and quality, a large factor can be the business’ reputation and loyalty. For customers to hear of issues of a business not taking care of their employees, they may feel that the business may not take care of them as the consumer. This distrust leads to customers shifting to competitors causing another loss to revenue.

Time is precious, don’t let it cost you

Errors will cost you more to make than if you were to take your time doing it correct the first time. Think about it, SRG now has to go back through all 6 years of records and correct them. They will now have employees spending a lot of time amending the pays and ensuring they are meeting the Australian legislation. This will now cost SRG more as they will need their employees working on correcting the errors instead of completing their regular work, falling behind and potentially needing overtime to catch up, therefore costing the company more in wages. Alternatively, they will need to hire a temporary team or outsource the work to complete the process, which will again cost even more.

The fallout is resignations

Peter Birtles, SRG’s chief executive, stood down almost a month before his original departure date due to the unfortunate error. Mr Birtles said “We are very disappointed that we have let these team members down and not met our standards, and we apologise to each person affected unreservedly”.

SRG may be losing their chief executive a month early to the error, but employees who have lost trust in the company may also leave the company, scared this may happen again in the future. Now the added cost of hiring and training comes into the picture, again adding to the cost of this payroll error.

The ripple effect from one error can cost you greatly and ensuring your payroll is 100% can be difficult but ETZ software creates an error free payroll. Our software automatically calculates all your pay rates and ruling ready for payment. We can automate and streamline your back office and timesheet process before accurately providing you with your payroll information. If you would like to learn more book a FREE demo today!

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