A few high-profile Australian payroll services scandals have rocked the business world over the last year. George Calombaris underpaid workers $7.8 million. Lush Cosmetics discovered a significant payroll error, underpaying staff since 2010. Wesfarmers uncovered $24 million in payroll errors. And ABC (yes, the iconic Free to Air television broadcasting service) admitted to underpaying casual staff over the past six years! While the issues in each company may be different. All mistakes fall under the payroll umbrella of the business process. When it comes to payroll no business can afford to make mistakes.
Payroll blunders do not only occur in large businesses where staff numbers are high, and possibly more difficult to manage. Larger companies have dedicated teams and diverse payroll software to assist in flushing out all the payroll details (and yet some BIG mistakes are still made). Who takes care of payroll administration for small businesses?. As a business owner, focusing on building your business – doing what you love, will always remain your top priority. Losing sleep, trying to wrap your head around payroll tax legislation, remembering tax deadlines, and not forgetting superannuation contributions is not what building a business should look like. Don’t let payroll make your role as a business owner taxing!
In Australia, more businesses are relying on payroll software. For paying employees and manage the entire payroll process/function. Self-managing a payroll system can keep costs down. However, the complexity of software varies in the industry. It is often limited to the number of employees within a business. In addition, there are special factors that need to be accounted for. These are often overlooked by a business owner who does not have the time or knowledge to be abreast of all payroll laws and considerations.
In addition, Australian businesses need to ensure the payroll software is considering various employee requirements. Some of these include Child Support, Flexi-Pay, Salary Sacrifice, PPL, and more. This is why it’s important for businesses to recognize the complexities involved in the payroll process. Just to ensure they pay staff accordingly.
So, what kind of mistakes do businesses (large or small – this applies to all companies) make when it comes to payroll.
1. Mis-handling data
Collecting the correct data, and ensuring data entry is precise is very important for an efficient payroll process. When collating information about employees, businesses are required to correctly classify employees to withhold the right amount of taxes. Payroll data includes employee tax file numbers, personal details, and payment information.
A simple way to minimize data entry blunders is to allow new hires to collate their own personal information into their payroll profile. Which involve them in the proofing process where employees can cross-check their profile. To ensure all details are correct.
2. Not adhering to payroll deadlines
Believe it or not, employees are often faced with reminding their employer to correctly pay their benefits. Also superannuation and salary correctly and on time. According to a 2019 HRM “, 23% of organizations with 1-10 employees admit to making late payments to staff”. And “22% of these ‘micro-businesses’ admit to making late superannuation payments”.
Deadlines do not end with employee payroll. You can’t forget your monthly payroll tax liability lodged quarterly. Late payments may cause a penalty. So it’s important to follow regulations and complete payments on time!
And to make matters more complicated, the Australian Tax Office introduced the Job Keeper payments. Which has to change rates and wage condition amounts businesses need to adhere to. With so many deadlines and commitments that are tied to payroll. Any wonder why business owners find it taxing to manage it themselves!
3. Forgetting the important bits
Just like data entry, the payroll process needs good attention to detail. There are so many different aspects of the entire process that can be overlooked quite easily. For example, Misclassifying employees. This simple mistake will lead to the incorrect application of award with overtime. Incorrectly understanding the award rate with overtime is a common mistake made by small businesses.
Don’t forget the superannuation contributions. Did you know that you can accidentally overpay an employee’s superannuation if they do overtime?. When it comes to superannuation contributions Small business directors are not always aware of the specifics.
And there is so much more to payroll than just employee taxable wages and superannuation contributions. Businesses need to specify contractor, apprentice, and trainee payments, document employee fringe benefits. And also employee allowances, include the director’s remuneration and manage employee sick leave. Fair Work states that a single employee is entitled to 10 days of sick leave per year calculated. As 1/26 of an employee’s ordinary hours of work in a year (I’ll leave that to your accountant to go over the finer details).
And lastly – what many would say, most importantly – the Fair Work Information Statement (FWIS). I’ll start with saying, you could receive a fine of up to $62,000. If you fail to provide your employees with a Fair Work Information Statement.
Payroll audit is unpleasant for any business, regardless if you’re running a large multinational organization or a small 20 employee company. In the case that your business is to be audited, you’re accurately kept business and payroll records will allow you to breeze through the audit with flying colors. This is a testament to why it is important to report every month and reconcile any issues. There may be some sort of human error. But going over your payroll records (and not forgetting to include all those important bits in point 3) will allow your business to continually improve accuracy. Always better to show you have self-corrected any mistakes along the way rather than being caught out trying to hide them further down the track.
Ever-changing Tax Law
Yes, the Tax Laws change frequently, and business owners need to keep up with variations made. It can be difficult for those small business owners who are focusing on actually building their business. To stay on top of law changes dictated by the Australian Taxation Office.
There you have it… There is so much to learn when it comes to payroll services in eastern suburbs. Staying on top of every little detail and law is tough. But it’s critical for your business to do so, to run smoothly and avoid payroll mistakes. The best way to take the “taxing” feeling out of payroll is to get in contact with our Accountants at R T Taxation & Accounting Services. You can take advantage of our Outsourced CFO Services to leave the administrative hassle of running your small business to the experts and for you to do what you know best.