Payroll compliance is a board-level responsibility and should be a driver of trust, sustainability and ethical leadership.
Presented by Yellow Canary
According to McKinsey’s 2024 report, ESG adoption has become mainstream, with more than 90 per cent of S&P 500 and approximately 70 per cent of Russell 1000 companies now issuing ESG disclosures. For directors, ESG is no longer a “nice to have”, but a defining measure of governance, risk management and leadership credibility.
While environmental commitments still dominate headlines, boards are under increasing scrutiny on the social and governance dimensions, areas where payroll compliance plays a central role.
Why payroll belongs on the ESG agenda
At its core, ESG is about sustainable value creation and building trust with stakeholders, including employees. Social and governance failures such as underpayments, superannuation shortfalls or long service leave mismanagement undermine not only legal compliance, but also brand reputation and shareholder confidence.
Yellow Canary’s analysis of more than 110 payroll compliance audits shows underpayment risks typically range from one to three per cent of total labour costs. For directors, this is more than a technical payroll issue and it represents a governance risk with direct financial and reputational implications.
Embedding payroll compliance into the “S” and “G”
Strengthening ESG performance depends on recognising payroll compliance as a board-level responsibility, rather than leaving it to be managed as a purely operational task. This begins with oversight and accountability, making wage compliance a standing board priority with clear reporting lines. It also requires transparency, demonstrating to stakeholders that employee entitlements are paid accurately and on time. Finally, it demands resilience and control, with the ability to monitor compliance on an ongoing basis to detect risks early and prevent systemic failures.
When approached in this way, payroll is no longer just a back-office function, it becomes a driver of trust, sustainability and ethical leadership.
Boards set the tone
Boards that elevate payroll compliance as part of ESG strategy can strengthen social and governance. By resourcing initiatives properly, demanding transparent reporting and linking payroll accuracy to risk management, directors demonstrate leadership in a space where regulators, investors and employees are paying close attention.
ESG is only as strong as its weakest link. Ongoing payroll compliance is a practical, measurable way to show authentic commitment to people, governance and long-term value creation.
Yellow Canary delivers automated, ongoing payroll compliance monitoring that identifies risks early and provides boards with transparent, audit-grade reporting.
Learn more about Yellow Canary.
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