Payroll is a workplace function that usually occurs in the background and simply just “happens.” Any business who adopts these top tips for best practice payroll compliance, should find that payroll is invisible to the rest of the business. It does however remain one of the most preventable areas of risk for many businesses.
With mandatory Single Touch Payroll Reporting (STP) now rolled out across businesses of all sizes, practices happening in all workplaces are now transparent to the ATO. Businesses must consider moving closer towards payroll best practice before the tax man comes knocking at your door.
What are the most common mistakes businesses make with their payroll?
BDO has listed the most common mistakes made in Australia as:
- employees unintentionally paid below their award rate
- incorrect withholding of PAYG creating problems for employees at tax time
- poorly managed (sometimes unlawful) salary sacrifice arrangements
- incorrect allocation of payroll related transactions in the accounting system
- businesses that struggle to meet the cashflow obligations of PAYG withholding tax and superannuation
- lack of transparency of accrued leave (especially long service leave)
- entitlements not correctly recognised in the accounting system.
A payroll function that is well-managed can preserve an organisation’s culture and safeguard against any payroll non-compliance risk – such as a loss of productivity, negative cashflow, ATO penalties and any industrial relations action taken against your business.
How to be payroll compliant
Ensure your accounting systems are up to date: Ensure your software is future-fit by adopting a cloud-based payroll system that integrates with your accounting system. This eliminates the need to manually enter data multiple times and reduces the risk of inconsistencies between systems. This will also ensure you’re prepared for all STP requirements.
Make it easy for staff to manage their details: If a task is made easy and user-friendly, it’s more likely to get done on time. Harnessing modern systems that are accessible, self-service interfaces for staff to manage their leave requests, personal details, access payslips, submit timesheets and view rosters, gives staff the best possible opportunity to follow the processes necessary for accuracy.
Reconcile key records every pay run: To protect your business against payroll compliance risk and unnecessary time spent adjusting accounting records, reconcile key accounts like PAYG withholding payable, superannuation payable and leave liabilities every pay run.
Keep abreast of legislation changes: Payroll related legislation, including awards, can change frequently. Keeping up to date with these is crucial to ensure staff are paid correctly and to minimise payroll compliance risk. Key legislation and regulations include (but are not limited to):
- Fair Work Act 2009 and amendments
- National Employment Standards
- Industry and Occupation Awards
- Superannuation Guarantee Rulings
- Long service leave (state based)
- Payroll tax (state based)
- Workers compensation legislation (state based)
- Australian Taxation Office updates.
Outsource to payroll experts: By outsourcing to payroll experts, you can turn your focus to your business needs and what you do best. Then you can enjoy peace of mind that your payroll compliance risk is being looked after and minimised with:
- Award interpretation guidance.
- Access to knowledge that is always up to date with legislation and best practice.
- Access to a dedicated payroll team, without the limitations of geographical location.
- Continuity of service all year round – no more managing leave and training new staff.
- No need to hire more staff as your business grows – the service scales up with your business needs.
- Adopting online systems ensures that all payroll-related processes, including outsourcing, are seamless and not bound by geographic limitations.
In conclusion, the introduction of Single Touch Payroll is the Australian Taxation Office’s first initiative to collect real-time transaction and compliance information, creating significant changes for how businesses across the country report to and engage with regulators. At Arabon, our business accounting packages provide options for payroll and superannuation services at a fixed monthly fee. You can fully outsource payroll to us or choose just the payroll services you need help with. It’s entirely up to you. A family-run business since 1986, Arabon has the knowledge and expertise to take care of the details so that you can focus your efforts on your core business. Call us today on 1300 ARABON or visit our website for more information.