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The Reasons Companies Get Caught in Employee Underpayment Scandals

Posted on Fri, May 31, 2019 @ 11:18 AM

In 2017, an audit performed on Domino's Pizza franchisees recovered $1.1 billion in unpaid wages and superannuation. Just last year, Lush Cosmetics was found to have a $2 million error resulting from the underpayment of employees. It seems like this type of problem has become more apparent. Is it because we have the capacity to hear more news than ever before, or has underpayment been a part of the business model? The following are some of the most common payroll errors and oversights that can result in this type of scandal.

  1. Incorrect Calculations of Overtime

Mistakes can easily be made when calculating overtime for employees. It's important to note the most current regulations and allowances for breaks, overtime, and part-time employees in order to properly calculate OT.

2. Termination Resulting in Underpayment

When terminating an employee, please be sure to reference the federal and state labor laws so that your organization stays in compliance. Make sure that you have allowed the proper length of notice and have compensated the exiting employee properly.

3. Company Pension Underpayments

Does your organization offer a pension program? Whether you are an employer or an employee, always take a look at how this program is operating and make sure that either the payments you receive are fair and correct or that the payments your organization is distributing are also correct.

4. Lack of Review Regarding Payroll and Outdated Systems

As legislation changes, compliance is affected and payroll systems must have the capability to update simultaneously. When was the last time the accuracy of your payroll system was assessed? Newer regulations that may benefit your employees may remain unimplemented.

Underpayment errors can happen to small businesses as well as major corporations. It's the type of oversight and payroll system that can make a great impact when it comes to being compliant. If you haven't performed a thorough assessment of your current payroll method, we encourage you to do so to avoid these major headaches.


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