Processing payroll accurately is a critical part of every business. Getting it wrong can lead to penalties, poor staff motivation and the sort of legal issues that you really do not want.
Because of its sensitivity, it can be both stressful and time consuming. It is also extremely complex so getting it right can be a challenge.
To help you make sure your payroll processing is accurate and efficient here are 6 critical tips that you should follow.
1. Check Legal and Regulatory Compliance
Make it a habit to always tick-off each and every compliance requirements applicable to your business whenever you are setting up a new employee in your payroll system.
Your legal obligations to your employees and other workers comes from various sources:
- federal, state and territory laws
- industrial awards and agreements
- tribunal decisions
- contracts of employment (whether written or verbal)
Here are some of your legal obligations as an employer:
- Ensuring your paying your employees correct wages in accordance to Fair Work requirements and the relevant award
- Providing employees with pay slips
- Reimbursing your employees for work-related expenses
- Ensuring a safe working environment
- Providing minimum leave entitlements
- Ensuring you have workers compensation insurance for each employee
- Forwarding PAYG tax instalments to the Australian Taxation Office (ATO)
- Making appropriate payment under the Superannuation Guarantee legislation.
- Stay Informed of State or Territory Tax Rate and Threshold
2. Stay Informed of State or Territory Tax Rate and Threshold
Every year tax rates and threshold changes. To cope up with the payroll tax concessions, always review your State or territory payroll, employee, and tax regulations and changes to avoid a significant amount of costly mistakes and delays.
For the current financial year, here are the Payroll tax rates and thresholds in different states in Australia.
Unlike payroll thresholds and key rates, Individual income tax rate changes won’t vary on the state you are located but it will be based on your residency status
The above rates do not include the Medicare levy of 2%. However, foreign residents are not required to pay the Medicare levy.
3. Be aware of your employee’s Award Classification
Award classifications can be complex to navigate and we have seen in recent time significant penalties for businesses that get it wrong. Make sure you are familiar with each award in detail and what each classification level means.
A simple task such as preparing toast or cooking eggs may change a person’s employment classification or even the award they should be considered to be employed under.
While this may seem crazy it is the law. In an event that an employer is proven to intentionally or even inadvertently misclassify employees, the employer may be liable to penalties under the Fair Work Act.
4. Have a consistent pay method and schedule
A weekly pay schedule is popular for workplaces with casual staff like cafe sector, and the best day of the week for you to do your payroll is on Wednesday.
This gives you enough time to collect all data, process payment, amend any mistakes and deal with any queries, as you have two business days either side of to accomplish all your payroll duties.
Under the section 323(2) of the Fair Work Act, it is stated there that employees must be paid by one, or a combination of either cash, cheque or electronic fund transfer.
Even if you have all the choices on how are you going to pay your employees, it is better to choose one mode of payment that you can use so you can streamline your payroll and won’t mess up identifying who’s on cash payment and who’s on the ETF.
5. Contractor or Employee
Many people are under the false impression that some statutory requirements such as superannuation and Workcover can be avoided by employing staff as contractors rather than employees.
Well it's not so easy and the government is wise to this type of manipulation.
Of course some staff are legitimately contractors and there could be benefits to hiring them as such.
Deliberately misclassifying staff as contractors could lead to penalties of up to $54,000 per contract. To check is you are compliant you can use this Employee/Contractor Check Tool.
6. Consider outsourcing
We all know how complicated payroll is, that is why outsourcing it can be a strategic and cost-effective option for your business.
By handing over your payroll to the experts who are knowledgeable about the current laws, you can save yourself from the stress brought by the never-ending complexities of regulations and government compliance that surrounds your payroll requirements.
In addition to that, you can regain the time taken away from you by your payroll responsibilities, so you can focus yourself more on the core tasks that help you manage and grow your business.
Do you still have any questions about payroll processing, you can talk to our team at Bookkeeping Central. Give us a call at 1300-855-763 and we'll help you address pressing issues with your payroll.