22 Apr 2025
Payroll is one of the most intrinsically complex arms of people management, governed by regulatory rules, cross border compliance challenges and reputational risks. And yet, despite payroll being so instrumental within the organisational structure, many executives continue to view the function as an administrative arm rather than a core business priority. Now, as we head further into 2025, it’s high time executives and boards start reassessing the way they perceive payroll fitting into organisational strategy.
Payroll as a governance issue
“Payroll is one of the largest expenses for most organisations, yet many executives still treat it as a back-office function rather than a key governance and financial control area,” explained Kim Boyd, National Sales and Marketing Manager at Frontier Software. “Viewing payroll strategically enables businesses to manage compliance risks, optimise labour costs, and enhance workforce planning.”
For Boyd, she believes executives should be prioritising payroll a governance issue – especially considering regulatory risks are increasing. She told HRD that the Fair Work Ombudsman and Australian Taxation Office are more actively enforcing compliance, with high-profile underpayment scandals leading to financial penalties and reputational damage.
“Inaccurate payroll data can lead to budget shortfalls, unexpected liabilities, and superannuation compliance issues,” added Boyd. “[Furthermore], payroll transparency improves employee trust - errors in pay can damage morale and increase turnover, affecting productivity and retention.”
Hindsight is, as they say, often 20/20. Many organisations make the mistake of dealing with payroll errors curatively rather than preventatively – scrambling with PR teams to mend brand image and reputation as well as avoid legal fines. In order to stay on top of any challenges, and keep out of the headlines, HR leaders need to secure that all important executive buy-in. And that all comes down to showing accuracy, efficiency and ROI.
“[It’s about] linking payroll to financial performance,” added Boyd. “Showing how cost per payslip, overtime rates, and workforce efficiency affect profitability. [HR leaders need to] demonstrate payroll accuracy as a compliance and governance issue – show how errors in payroll can expose the organisation to financial and reputational risks. [Finally, it comes down to] using executive dashboards – providing real-time payroll data in an accessible format helps executives make informed decisions about cost control and workforce planning.”
Essential payroll metrics for an executive dashboard
It's this core aspect of utilising key payroll metrics in an executive dashboard that could be a gamechanger for departments moving forward. As Boyd explained, a well-structured dashboard should include essential metrics which effectively address issues such as cost efficiency, compliance and workforce management. She told HRD that these key metrics can include;
Total Payroll Cost as a Percentage of Revenue: Identifies whether labour costs are growing disproportionately to revenue.
Payroll Processing Accuracy Rate: Ensures compliance with wage and superannuation laws while minimising financial exposure.
Cost per Payslip: Highlights payroll inefficiencies and areas for process improvement.
Superannuation Compliance Rate: Reduces risk of ATO penalties and ensures employee entitlements are met.
Leave Liability: Helps manage financial exposure from growing leave balances and supports workforce wellbeing.
Overtime as a Percentage of Base Salary: Identifies operational inefficiencies that may require restructuring.
Single Touch Payroll (STP) Compliance Rate: Ensures the business is meeting ATO reporting requirements.
“By integrating these metrics into dashboards, executives can monitor payroll risks in real time, improve cost control, and align payroll practices with overall business strategy,” added Boyd.
Payroll miscalculations cause HR headaches
Payroll mistakes don’t come cheap – and while employees may forgive a leadership mistake they’re less likely to overlook being underpaid. With increasingly strict rules and regulations around payroll compliance, enhanced payroll data and metrics are no longer a ‘nice to have’ – they’re a business necessity.
“Payroll governance failures have affected businesses across multiple industries in Australia, proving that no organisation is immune to payroll compliance risks,” Boyd told HRD.
“These failures often stem from complex award structures, misinterpretation of entitlements, outdated payroll systems, or lack of executive oversight.”
Case in point arose in the retail industry in 2019, when a major employer disclosed it had underpaid thousands of salaried staff over several years with total underpayments estimated in the hundreds of millions.
“Payroll systems had not been configured to accurately account for fluctuating work hours, leading to systemic underpayments,” added Boyd. “This resulted in a large-scale remediation process, where the business had to reimburse employees, overhaul payroll systems, and introduce stronger compliance measures to prevent recurrence.”
Boyd went on to explain how the logistics sector has also experienced long-term payroll miscalculations, with one organisation discovering that payroll system errors had led to thousands of employees being underpaid over nearly a decade.
“The complexity of shift allowances, overtime, and varying award conditions made it difficult to detect discrepancies. These errors went unnoticed until a regulatory review exposed the issue, prompting a company-wide audit and significant financial penalties. This case highlights how payroll errors can persist over long periods without proactive governance and regular compliance checks.”
What’s more, in the public sector, compliance failures related to superannuation payments have led to widespread underpayments, with regulatory bodies estimating billions of dollars in unpaid entitlements across multiple organisations.
“The Australian Taxation Office (ATO) has increased scrutiny on superannuation guarantee compliance, holding businesses accountable for any missed contributions. In some cases, directors have been found personally liable for unpaid superannuation, reinforcing the importance of executive oversight in payroll governance.”
Biggest regulatory risks in payroll management
As such, when it comes to assessing risks in Australian payroll management, there’s four major areas that HR leaders need to keep an eye on;
Wage compliance failures: Misinterpretation of modern awards and enterprise agreements can lead to underpayments and penalties.
Superannuation guarantee non-compliance: The ATO has intensified enforcement, and non-payment can result in fines and director liability.
Payroll tax miscalculations: Variations in state-based payroll tax requirements increase compliance complexity.
STP (Single Touch Payroll) reporting failures: Late or inaccurate reporting can flag an organisation for audits.
The answer to not falling foul of these transgressions? Once again, it comes down to engaging that C-suite helping hand and leveraging the data you have.
“By prioritising payroll governance at the executive level, organisations can reduce regulatory exposure and maintain a strong compliance record,” added Boyd. “Regular compliance audits and implementing quarterly payroll audits to identify and rectify discrepancies [helps here].
“There’s also] investment in payroll technology – using automation and AI-driven systems to ensure award and tax compliance.[Organisations should look at] education and training on payroll governance, ensuring board members understand payroll obligations and compliance risks. [Finally there’s] integrating payroll oversight into risk committees and treating payroll compliance as a key corporate governance function.”
Integrating payroll data into organisational strategy
But what’s the point of all this data if it’s not being monitored? The very best Australian companies aren’t just tracking metrics here, they’re fully integrating them into dashboards in order to showcase to the C-suite exactly how payroll is performing in relation to revenue.
Afterall, one of the biggest indicators that something has gone amiss in payroll, as pointed out by Boyd, is when your payroll cost is creeping up your percentage of revenue. In the majority of Australian organisations that figure normally sits around the 20%-40% mark – dependent on sector. However, if you spot that percentage suddenly rising, it’s time to consult your dashboard again and pinpoint what exactly is amiss.
“Payroll data should not exist in isolation,” explained Boyd. “It should be integrated into broader financial and operational dashboards to support strategic decision-making. Key integration strategies include linking payroll data to workforce planning models, aligning payroll costs with financial forecasting, using AI-driven analytics for predictive modelling and incorporating real-time payroll KPIs into board reports.”
As for the future of payroll in Australian organisations, the rise and rise of HR technology points to a more integrated system, one which sees payroll as a core arm of strategy rather than a pen-pushing, back-office function. From AI-driven compliance to increased regulatory scrutiny, board-level accountability to enhancing the employee experience – there’s a whole world of payroll metrics out there that won’t just help you stay compliant but actually supercharge your overall business goals.
“Over the next five years, payroll in Australian companies will become more automated, data-driven, and strategically integrated,” added Boyd. “The future of payroll will shift from a transactional process to a strategic function, with automation and data analytics ensuring payroll teams can provide real-time insights that drive business decisions.”
It’s an exciting time for payroll – don’t miss out on future insights, advice and solutions from industry leader Frontier Software.