Canadian Payroll Reporter

3 Canadian HR Reporter, a Thomson Reuters business 2016 Putting employment standards practices under the microscope By regularly reviewing company policies and practices, payroll can help ensure it is complying with the law before employment standards officers come knocking BY SHEILA BRAWN NO ONE LIKES to make errors, but for payroll departments mis- takes can be costly. Fines and penalties can add up quickly if payroll professionals are not fol- lowing the rules. This does not just apply to source deductions and remit- tances. Errors related to paying employees can get employers in trouble with provincial/ter- ritorial employment standards board. For instance, in Ontario, the top five complaints against employers in 2014/15 were all related to employee payments: unpaid wages, vacation pay/ time, termination pay, public holiday pay and overtime pay. Employers that do not com- ply with employment standards rules risk the penalties that may come with complaints, inspec- tions, audits and possible prose- cutions. One way for payroll and human resources departments to help keep their employer out of trouble is to review their prac- tices to ensure they are following the rules. "It's hard to answer (an Em- ployment Standards) audit and say that you are paying people properly for overtime and hours of work if you don't actually know," says Tim Lawson, a part- ner in the labour and employ- ment group at the law firm Mc- Carthy Tétrault in Toronto. He recommends that before Employment Standards auditors or inspectors ever come calling employers audit their own prac- tices to look for problems. Law- son says employers should do this at least once every two years and whenever they are changing job classifications or policies af- fecting employment standards, such as rules around overtime, vacation pay, or termination pay. Lawson adds that for employ- ers in Ontario, these kinds of pro-active audits are particularly important now that Employ- ment Standards officers can re- quire employers to conduct self- audits and report the results to them. The government amend- ed the Employment Standards Act, 2000 to add this provision as of May 20, 2015. "The audit can cover anything that the government is interest- ed in looking at, but typically the audit will be focused on hours of work, overtime," he says. If a government-mandated self-audit shows an employer has not complied with employment standards rules, the employer has to report this and provide proof it is taking steps to correct the violation, such as paying out- standing wages. While admit- ting an error is the right thing to do, Lawson points out it could lead to further Employment Standards investigations. "There's a risk that even if in your response you say that 'We have corrected a problem and here is how we have corrected it', the government will look into that a little bit deeper and make enquiries to ensure that you have met your obligations," he says. "(A mandatory self-audit) may be the first step towards a full-blown inspection by an in- spector. Payroll has to be very careful about what exactly they are responding about and how to frame that response so that they are not putting their organiza- tion into unnecessary jeopardy," Lawson adds. "We are advising our clients to be proactive and conduct their own self-audit in advance so that they are not going to be sur- prised when the (government's self-audit) letter comes to the door," he says. Ontario is not the only juris- diction that may ask employers to audit their practices and re- port back. Lawson says some of his federally regulated clients re- cently received self-assessment questionnaires from the federal government asking them to re- port on whether they are com- plying with Canada Labour Code rules for wages, hours of work, statutory holidays and va- cations. "It's the wave of the future ac- tually because it's an easy way for governments to get information about companies without actu- ally having to send in auditors or inspectors," he says. Nova Scotia's Labour Stan- dards Division also sends em- ployers self-audit question- naires. When it first started using them in 2003, the self-au- dits looked at issues around em- ployee pay. Now they focus more on employer record-keeping. "In the last few years, we have used self-audits more to assess record-keeping requirements, not as much for issues around pay," says Lynn Hartley, director of the Labour Standards Divi- sion. "Now, with issues of pay, we're more likely to do a more comprehensive audit." "We were questioning were we getting the value out of the self-audit?" she says. "We were finding that they seemed to work quite well with the record- keeping pieces, things that are a little more straightforward. 'Are you keeping information about the gross pay?' 'Are you keeping information about the deduc- tions from pay?' 'Are you keeping information about whether you are paying holiday pay?'" News CPR | March 2016 see SELF-AUDITS page 8 Credit: BrAt82/Shutterstock

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