Payroll audit for dental practices

Have you ever audited your payroll? No, me neither.
Then I started reading Fairwork decisions. Fairwork has recently awarded against an employer (surprise, surprise) granting a worker holiday pay when the employer thought the worker clearly accepted they were employed as a casual.
This has cost the employer a considerable sum of money.

How do we guard against this type of expensive judgement?

In this case if the employer paid the worker the base rate and a separate casual loading then the employee would not have gained anything. Many of us, however, have traditionally lumped the casual loading into the pay rate. Few of us have clear contracts or well-defined pay slips. This leaves us just as exposed as we would be when a patient complains to AHPRA and we have a less than perfect dental record.

Dental Business risks are more than just Dental records

Just as your dental record keeping needs constant review, it may be timely to do a self audit of employee documents. SmartDentist has recently revised its HR area to bring all staff information in the one page. e.g. policies signed off, forms signed, immunisation records, training records, employee conversation records etc. While not part of SmartDentist, we hear from small business that many people find it difficult to keep up with payroll rules and regulations. Over the next couple of weeks Smartdentist will be include audits and helpful information for practices on self auditing your business. This will follow information available to all in the Fairwork document: Guide to self auditing your business.

Part 1: Auditing Payroll Calculations and Categories (Download)
*These instructions are based on MYOB and may not be relevant for Xero

Check out the calculations used in your software program. Things change over the years and your software may never have been setup correctly.

  1. Current Tax tables – in MYOB you do need to load current tax tables into the program (even the online version of MYOB).
  2. Check sick leave accrual calculations and holiday calculations. You may be under or over entitling staff. Both could be costly.
  3. Understand what employee payments need the superannuation guarantee. Other than overtime, most wages require the 9.5% superannuation. Contractors also should be paid superannuation (to cover you against future claims!)

If you find a difference between my audit % figures and those in your payroll program, call your accountant/bookkeeper and ask why!

Payroll Category List
Within the pay slip you are required to keep a record of any bonus, loading, penalty rate or allowance that is separately identifiable. It is in your best interest to make sure you record the following as separate details on the pay slip:

  • Casual loadings – this is best as a separate entity rather than including the casual loading and hourly rate as the one amount. This reduces the business risk in a dispute.
  • Unpaid leave – record this in your program. All leave, paid and unpaid is required to be recorded by law. Again this is your guaranteed defense in a dispute.

My suggestions: Add time-off-in-lieu as an entitlement and you can start to record this as a + or – for each staff member. While the Health Professionals and Support Services Award allows for averaging time over 4 weeks it is best to have some record when asked. If you include it as an entitlement the payroll program will automate the records.

Employee Contract and Individual Flexible Arrangements

Dental practices tend to think about contracts only in respect to employing dentists but they are just as important for all other staff. The reason for having a contract is to clearly remind every one of the employee/employer relationship and obligations. If you do not have a contract the HP&SS Award effectively becomes your default contract. The benefit of a proper contract is to further expand and formalise obligations. It is never too late to get a staff member to sign a contract. It offers them security and clarity as well. Just as you can get staff to sign policies and procedures as they change, you can ask staff to sign an employment contract at any time (be nice about it).
The cost of getting a lawyer to draw up employment contracts for non-dental staff would be $2-3000 per practice. For a suite of contracts including dentist contracts and Service Facility Agreements the cost would be $4-6000 per practice. [Ask Brad Wright (Dentist and Lawyer/Barrister for advise or direction – Dental Legal Solutions]

The ADA HR has a series of templates contracts that are well worth reading to see what extra’s can be expected to be found in a contract of employment.
If you have traditionally paid a staff member an off-set amount (extra money instead of laundry, uniform and overtime pay) you can place this into contract but it may not be binding. You should consider also having an individual flexible arrangement which can clearly state these off-set amounts. Remember to regularly make sure that the staff member is actually better off with this arrangement. See the Fairwork site for more information on Individual Flexible Arrangements.

Once you have completed Part 1 of the audit have a rest!
More soon.
Glenda Farmer

Posted in ADA