EY faces potential fines from the tax office after falling more than six months behind in making superannuation payments for hundreds of staff due to ongoing problems with its newly-outsourced payroll function.
The big four consulting firm, which provides advice to clients about outsourcing and taxation, outsourced its payroll function to multinational services provider ADP this year as part of a move to improve services and cut costs.
EY, which has more than 6000 staff, emphasised that all staff and contractors affected would receive their super entitlements and that the firm was working as fast as it could to fix the problem.
Employers who fail to pay super 28 days after the end of the quarter face a maximum fine set at 200 per cent of the underpayment.
They must also pay interest backdated to the start of the quarter and an administrative fee. The whole amount then becomes a non-deductable expense for the business.
Institute of Public Accountants senior tax adviser Tony Greco said the cost could quickly add up for big businesses with large numbers of employees.
“It’s quite onerous,” he said. “Even if you’re a week late, you get the same treatment as a serial offender.”
In 2017 the Commonwealth Bank found it had underpaid an estimated $22 million in super to thousands of part-time staff who worked additional hours.
However, Mr Greco said that complication arose from failing to calculate the ordinary time earnings properly. He said he saw no reason not to pay no super at all.
“If it’s outsourced or in-housed, it shouldn’t matter,” he said. “I can’t see why you wouldn’t pay any of it.”
One email sent to affected EY staff and contractors in late July states the problems centre around creating and changing super accounts.
“As some of you would already be aware, we have experienced issues with superannuation processing including the creation of, or changes to, superannuation accounts for some employees in recent months, including yourself,” the email from EY Payroll states.
Mr Greco warned that fewer employers could risk “running the gauntlet” by delaying super payments after the tax office mandated single touch payroll last year.
The payroll system means employers report pay as you go tax and super information to the tax man at the time they pay it.
“The ATO now have more real-time data to see what’s happening and there’s also more visibility from employees to make sure those payments are made,” he said.
An EY spokeswoman said it was a “common practice for large organisations to outsource” payroll.
“EY began transitioning its payroll function to one of the world’s largest outsourced payroll service providers in March this year,” she said.
“While there have been some issues in the transition process – not unexpected for a payroll transition of this size and complexity – they have largely been addressed. Any outlying issues are being addressed as a priority.
“We are working to ensure all staff are kept up to date throughout this transition process. No staff members will be financially disadvantaged as a result of the transition.”
She added that the Australian Tax Office was aware the firm was “doing a full review of all our obligations and we will be fully disclosing all matters to them once they are resolved”.
A spokeswoman for ADP said the company took “responsibility to assist our clients in complying with all local laws, rules and regulations very seriously”.