What’s your payroll process? Are you paying ‘right’?

What has been the foundation of the payroll process in your business? What supports it?

These might seem like strange questions, as assuming you have employees, you would have had to pay them – right? As long as your employees get paid, you’ve done your due – right?

Sorry; but there’s a bit more to ‘right’.

Did you know:

    • Payslips must be provided within 24 hours of payment being made
    • Overpayments generally cannot just be recovered from the next payrun, you must have a written agreement with the employee as to how much can be recovered and how often
    • If your employees are salary sacrificing to super, these amounts must be paid to the super funds by the 28th of the month following the pay run the amount was sacrificed in
    • Superannuation is only payable on ordinary time earnings, not on overtime or allowances
    • The 50-odd things you need to take into account when processing a redundancy payment?

Australian payroll law is very complex. To comply takes some effort. But that doesn’t mean it’s out of reach or to not perform your due diligence to pay your staff correctly.

To many, payroll may seem a chore – a consequence of having employees – just like cleaning is a consequence of owning your own house. People go into business to make money, not to perform a payroll; the same way people buy houses to have their own space, not to clean. You tell us who has bought a home so they have something to clean and we will do our best to find someone who has entered business so they can perform a payroll (payroll service providers excluded).

The question is, are you sure you are meeting all the payroll obligations imposed on you the minute you employ someone? The Super Guarantee obligation? Reporting obligations? Penalty rate and allowances obligations? Fringe Benefits Tax obligations? Pay slip obligations? These should all have been considered when ‘founding’ your payroll.

How do you know if you are meeting these obligations?

How do you know if you aren’t meeting these obligations?

There is no ‘one-size-fits-all’ answer.

You have to do the hard work, or have someone do it for you.

Business owners, directors and those involved in performing the payroll process can each be deemed personally liable for payroll errors or omissions in addition to a business being held liable. Read through these articles to get an idea of the penalties that can be imposed:

Often we just don’t foresee how badly things can go wrong.

So, what do I do to find out if I’m paying ‘right’?

Follow these steps:

    Step 1: Determine what Award or Agreement each of your employees are covered by, and at what level they are classified at
    This may be different for each employee, depending on what tasks they perform. Some of your employees may not come under an award or agreement at all. You can use the Fair Work website to find out what applies, or if you are still uncertain you can call Fair Work on 13 13 94 to get direction on what award or agreement your employees come under.

    Step 2: Table your payroll information
    You now should have certainty on what the applicable minimum pay rates are for each of your employees, and whether they are entitled to penalty rates or allowances. We suggest you put this information into a table for ease of reference.

    Step 3: Schedule regular reviews
    Create a recurring task to review the table created in Step 2 and ensure that any updates or changes to relevant legislation, awards or agreements are captured. This should be done at least annually, ideally around June or July when changes to the minimum rates and withholding rates are made.

    Step 4: Check Year-To-Date payroll figures
    Using the table you created in Step 2, check your year-to-date payroll figures to check that you have been paying at least the minimum entitlements for each employee. Any shortfalls should be rectified with a back payment. If there are significant shortfalls, it is probably going to be in your interests to review payroll data from previous years as well, to make sure long term errors or omissions are rectified.

    Step 5: Monitor
    Now you should be confident that your payroll to date is correct and can just monitor going forward.

These steps apply regardless of whether you perform your payroll in house or outsource it. Outsourcing your payroll doesn’t remove your responsibility to ensure that your staff are being paid ‘right’.

How can I ensure our payroll complies going forward?

As a business owner or director you should ensure that:

    • Any person involved in the payroll process has undertaken payroll training – check out an introductory to mid level course at http://www.austpayroll.com.au/training/payroll-fundamentals
    • Investment is made into keeping up to date with the changing payroll and taxation landscape, at least annually
    • Those involved in payroll have access to specialist resources they can call on to resolve queries beyond their knowledge – we would suggest Employsure or similar, contact us to discuss
    • There is a culture of payroll compliance throughout your organisation

Consequences of not paying ‘right’ and or not being suitably qualified to perform payroll can include:

    • Negative impact on team morale and performance
    • Less time for you to spend on your business because you are fixing problems in the business
    • Missing key payroll lodgement and payment deadlines
    • Incurring penalties and interest on late payments or lodgements
    • Incorrect reporting on payment summaries
    • Fines at a personal and business level
    • Negative publicity

We definitely don’t want to persuade any one out of providing employment but we do want to highlight the importance of getting payroll right.

Because it’s not worth getting it wrong; for either you, your team or your business.

If you are unsure if you are meeting your payroll obligations, or have any questions regarding this article, please call us on 03 5339 3200 or contact us here to discuss.

Thanks for reading.

By Genna Kidd

The information contained on this website has been provided as general advice only. The contents have been prepared without taking account of your personal objectives, financial situation or needs. You should, before you make any decision regarding any information, strategies or products mentioned on this website, consult your own financial advisor to consider whether that is appropriate having regard to your own objectives, financial situation and needs.

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