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Finance leaders need to understand how the major changes to workplace laws impact their role and the operations of the business.
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IR reforms: A productivity predicament for finance leaders
30 August 2024
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As Australian businesses grapple with rising operational costs, fierce market competition, and an ever-evolving regulatory landscape, finance leaders are under increasing pressure to enhance productivity while safeguarding profitability. However, for many, the government’s new industrial relations (IR) reforms are set to intensify these challenges. To avoid a negative impact on their business, it’s crucial that finance leaders are able to adapt swiftly and strategically.
Payroll management will be a key area where these new IR reforms will add greater complexity, with the function predominantly falling under the remit of finance teams in Australia. In fact, according to the Australian Payroll Association (APA), 56 per cent of finance leaders in Australia manage this important aspect of business operations.
Now, finance leaders must understand not just how these laws will impact their role, but also how to ensure productivity is maintained across their business.
What finance leaders need to know
Australia’s new IR reforms represent one of the most significant overhauls in workplace laws in recent years. Closing Loopholes No.2 Act has introduced the “right to disconnect”, stricter definitions of casual work, and the reinforcement of fair work practices. Like any major workplace reforms, this is bound to impact business costs and employee productivity, which is a major concern for finance leaders.
Recent findings from Rippling’s research indicate that increasing productivity is a top priority for almost half (46 per cent) of finance leaders, with technological investments seen as a critical means to boost operational efficiency. Yet, the very reforms meant to protect employees could also pose hurdles to achieving these goals.
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Moreover, a significant proportion (43 per cent) of finance leaders already cite the high cost of doing business as a substantial obstacle to productivity – complying with new workplace laws can often introduce new costs and the cost of non-compliance is even greater. Nearly half of finance leaders (49 per cent) are even considering international hiring as a response to the challenges posed by new IR reforms.
For finance leaders, these reforms present a dual challenge: ensuring compliance while simultaneously driving productivity in a complex and often unpredictable environment. Given the central role of payroll in managing employee compensation and compliance, IR reforms will also have a direct and significant impact on how payroll is managed.
The impact of IR reforms on productivity
The right to disconnect mandates that employees are not obligated to engage in work communications outside of their contracted hours. There is concern that this will harm the productivity of businesses that thrive on flexibility and a fast-paced environment, where teams work around the clock and across different time zones. Finance leaders need to work closely with the HR team to consider the operational needs of their business while respecting the new regulations, being flexible with work hours, settling realistic expectations for communication outside of standard work times, and being open to feedback from employees about their work/life balance. This balanced approach can help ensure compliance without sacrificing the agility and innovation that drive growth.
The complexity introduced by the new IR reforms also places additional pressure on payroll management – a function already facing significant challenges. For instance, with the right to disconnect, finance teams must ensure that payroll systems can accurately track work hours, manage overtime, and handle any pay adjustments in compliance with these new rules.
Moreover, the reforms’ emphasis on fair work practices and the definition of casual work means that payroll systems must be capable of handling a more nuanced and legally compliant approach to employee classification and compensation. This includes accurately distinguishing between casual and permanent employees; applying the correct pay rates; and ensuring that all entitlements, such as leave and superannuation, are correctly calculated.
The APA showed that the majority (56 per cent) of payroll professionals have experienced an increased workload since the pandemic and many (38 per cent) identify payroll processes and technology as their biggest challenges. Given the increased pressure on payroll functions, processes need to be streamlined and made more efficient to maintain productivity amid these regulatory changes.
Preparing for the IR reforms
Without effective management, the risk of non-compliance with IR reforms could lead to costly penalties and damage to the organisation’s reputation. To navigate these challenges, finance leaders must leverage technology and strategic planning to enhance productivity while ensuring compliance. Here are key strategies to consider:
Automation: Technology is not just a tool for efficiency; it’s a necessity for compliance. By automating payroll processes, finance teams can reduce the risk of errors, ensure consistent compliance with new laws, and free up time for more strategic initiatives. Automation can handle complex calculations, track compliance with fair work practices, and reduce the administrative burden on finance teams.
Centralised systems: With the complexity of IR reforms, maintaining accurate and consistent employee data across multiple systems is more critical than ever. A centralised payroll system can create a single source of truth, ensuring that any updates or changes are reflected across the entire organisation. This not only reduces the risk of non-compliance, but also streamlines operations, making it easier to manage a global workforce.
Leveraging global talent: As the IR reforms drive more finance leaders to consider international hiring, it’s essential to have the right tools to manage a global workforce effectively. Utilise platforms that support global hiring, taking the heavy lifting out of functions like onboarding, paying, and managing employees worldwide. This capability is also helpful for maintaining compliance with both local and international regulations while tapping into the global talent pool to enhance productivity.
Engaging external consultants: The complexity of the new laws may require expertise beyond the in-house capabilities of many organisations. Engaging external consultants, from legal and financial advisers to HR specialists, can provide invaluable insights into the nuances of the reforms. Experts can help identify potential risks, suggest compliance strategies, and ensure that your organisation is fully prepared for the changes.
The path forward for finance leaders
The new IR reforms present a challenging landscape for finance leaders in Australia, particularly in the realm of payroll management. However, by adopting a proactive approach and leveraging advanced technologies, finance leaders can effectively navigate these challenges, while also turning them into opportunities for enhanced productivity and operational efficiency. By investing in technology, exploring global talent, and seeking expert advice, finance leaders can ensure that their organisations remain compliant while driving growth and profitability in an increasingly regulated environment.
By Matt Loop, VP and head of Asia, Rippling
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