The cost of getting payroll wrong
When National Australia Bank (NAB) recently disclosed it faces a staggering AUSD 130 million in costs due to historical payroll underpayments, some dating back more than a decade, it was headline news. However, while reports tend to focus on the scale of such mistakes made by large institutions, the underlying message should resonate deeply with organisations of every size: payroll errors are a serious issue, and can lead to significant financial, regulatory, and reputational consequences, for organisations of any size.
The hidden complexity behind payroll
Payroll is one of the most complex administrative functions in any organisation. From ensuring compliance with ever-changing legislation to managing multi-jurisdictional regulations, even small oversights can result in major problems.
The NAB case highlights how historical underpayments can accumulate silently. These mistakes can happen due to outdated systems, legacy processes, or human error. That’s why internal and external compliance checks, layered process controls, redundancy mechanisms, and well-trained staff are essential. Companies should be aware that even these safeguards can fail without regular review and testing, so continuous monitoring of all processes is a must.
The real cost
When payroll mistakes become public, repaying the money owed is the easy part. Rehabilitating a company’s image in the wake of a high-profile financial scandal can pose a serious challenge. When an error of that of NBA’s magnitude is exposed, employees and the public may question the company’s integrity and operational competence.
Additionally, for employees, being underpaid can severely impact morale, no matter how minor the discrepancy. Workers must have confidence that their employer will ensure that they are paid correctly and on time, every time. Once that trust is broken, engagement, loyalty, and productivity can all decline sharply.
Regulatory lessons from the UK
The UK offers a powerful illustration of how payroll compliance can trip up even well-intentioned businesses. Between 2022 and 2024, HM Revenue & Customs (HMRC) publicly ‘named and shamed’ more than 500 companies for failing to pay the national minimum wage. While many of these breaches were unintentional, the consequences were severe.
The threshold for a breach was just £100, regardless of whether the company employed one person or 10,000. Small, accidental underpayments across a large workforce could therefore trigger significant fines, back payments, and reputational damage. Once a complaint was lodged, HMRC would initiate a full on-site audit, placing immense pressure on payroll teams to identify and correct mistakes.
Many errors stemmed from the complexity of wage rules themselves. For example, if an employee earning minimum wage was required to buy a specific uniform out of pocket, that expense effectively reduced their pay below the legal threshold. Likewise, overtime or averaged-hour arrangements could inadvertently push workers below minimum wage, requiring additional payments that were often overlooked.
Avoiding the pitfalls via technology, training, and outsourcing
So, how can businesses safeguard themselves? The key lies in proactive governance and investment in modern payroll technology. Automation, integrated HR systems, and real-time compliance monitoring can help detect anomalies early, before they escalate into regulatory breaches.
For growing companies and startups, outsourcing payroll to a specialist provider can also be a cost-effective safeguard. Expert partners are equipped to navigate complex tax legislation and employment laws across multiple jurisdictions, reducing the likelihood of human error and oversight.
However, outsourcing is not a silver bullet. For organisations managing payroll internally, ongoing staff training, meticulous process documentation, and regular audits are essential. Payroll teams should are a core part of a company’s compliance framework and risk management strategy and should be treated as such.
A strategic function, not a transactional one
The NAB case serves as a stark reminder that payroll presents serious risks and requires board-level attention. Regular reviews, process testing, and technology investment should be seen not as optional expenses, but as critical components of operational resilience.
In today’s regulatory environment, ignorance is no defence. Businesses that fail to prioritise payroll accuracy and compliance place themselves in financial and reputational danger. By recognising payroll as both a people issue and a governance priority, organisations can protect their finances, their reputations, and most importantly, the trust of their employees.
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