Mistakes are inevitable in every business.
There are times that a simple error can have serious repercussions and one area of your business you definitely don’t want to mess up is payroll.
Aside from that fact that payroll mistakes can have a very costly consequences, the implications of a Fair Work or ATO audit can be devastating.
So here are some of the costly payroll blunders that are common in the hospitality industry.
1. Misclassifying employees
Did you know that all of those Award Levels and Classifications actually mean something. As tasks get added to an employee they may rise up the classification ladder. It is important to be aware of the classifications and how your work practices might affect them.
2. Falling behind payroll tax
Penalties for late lodgement and payment of Payroll Tax can be significant. Ensuring you are correctly registered and up to date is absolutely critical. Each state has its own rules and rates so make sure you are across your state's requirements.
If you are operating across multiple entities it is vital that you get advice as to whether or not those entities will be considered as one for Payroll Tax purposes. The same goes for businesses operating across multiple states.
3. Failing to know the rules
As the Fair Work Ombudsman intensified their compliance monitoring campaign in a wide range of industries across Australia including cafe and restaurant sectors inspectors have found a significant number of businesses whose employment practices contravene the Fair Work Act due to lack of understanding or awareness of the mandated obligations and rights under the commonwealth workplace relations laws.
Failure to pay the correct base hourly, penalty and overtime rates and inadequate or non-existent recordkeeping and payslips are the common breaches throughout the hospitality industry.
Nearly one-third of the most serious non-compliance cases that the FWO takes to court involve sectors like restaurant, cafe or takeaway food outlet. Although, one in ten disputes have already been resolved.
4. Not aware of the payroll tax changes
Forgetting to stay on top of payroll changes can lead to miscalculation of your tax payment, as tax rates vary every year, From July 1, depending on which state you are located.
The rules and regulations regarding the payroll tax and its deductions are very strict that even small unintentional miscalculation can cause problems.
When you pay the wrong rate, you will have to make up the owed taxes, plus penalties and interest
5. Paying late
Employees are the most valuable asset in your business, that is why payroll is needed to be on time.
Late payment may not cost you directly, but this can lead to low morale and high turnover that might affect your business’ productivity. This might also ring the bell of the government for an audit.
6. Poor recordkeeping
Poor recordkeeping has hurt many businesses financially, but there are some who still overlook the importance of proper payroll recordkeeping.
A serious knock-on effect of keeping bad payroll records may take place on your staff pay-cycle, period of filing taxes or audit checks that in the long might get you penalized by the tax authorities for non-compliance.
An infringement notice will be issued by a Fair Work Inspector to an employer who doesn’t follow the record-keeping obligations under Australian workplace law.
Fine per breach for an individual will cost up to $1,260 while for a corporation, it will cost up to $6,300 per breach.
We can’t emphasize enough, payroll errors are very expensive and time-consuming. If you tick any of those mistakes mentioned above, the best way to fix them usually starts with talking.
You can book a free consultation with the team at Bookkeeping Central by shooting us a message or get on the line with us at 1300 855 763 to ensure that you will prevent the fire from spreading before it totally consumes your business.
