It can be one of those business areas that causes confusion and anxiety for both leaders and teams. What can be considered when thinking about how to get this function humming along?
Structure and Setup
As you may have experienced, your business or organisational payroll can be complicated and time-consuming. Getting it wrong or paying staff late can be difficult for the team, and potentially lead you into unexpected backlogs or corrections.
Key to you having a good payroll system is ensuring that your payroll system is set up and configured correctly.
Depending on what system you are using, there may be a number of important configurations to attend to, including:
- creating correct payroll calendars, cycles and procedures
- setting up the payroll components of your general ledger to give you the tracking and information you need
- mapping your default payroll accounts correctly
- setting up all your pay items (with the correct configurations of PAYG, superannuation, and BAS reporting) to support your payroll structure
- setting up your leave items (for example annual leave, personal leave, long service leave) to match with your local leave management preferences
- setting up superannuation in your system
- setting up and reviewing your Single Touch Payroll
Then build each employee into the system, including:
- Employee details and contact information
- Employee pay cycle
- Taxation and employment basis
- Leave accruals and balances
- Employee bank account(s) for net pays
- Standard pay template (capturing their pay structure)
- Superannuation accruals
And remember to collect the relevant documents you’ll need from each team member – in the areas of employee details and contracts (where relevant), Tax File Number information, Superannuation Fund information – as well as advising employees of any obligatory Fair Work information.
A special note on Long Service Leave – Long Service Leave (LSL) in your business may be one of those things that tends to get put in the “too hard basket”. It’s difficult enough to track LSL in a standard business, but you are probably aware of some of the additional difficulties you may face:
- LSL arrangements can be different for your individual team members
- LSL for some of your team could be transferable from one employer to another (in some circumstances)
- your LSL calculations may not be handled well by automatic payroll systems (due to the complexity and components of your payroll structures)
To ensure Long Service Leave gets the attention it needs, you may find it helpful to put in some additional steps like:
- monitoring a regular cycle of when your LSL obligations are to be updated
- calculating your LSL liability for each of your employees, based on their employment type and the employment arrangement you have with them
- updating the general ledger of your accounting system to reflect your updated LSL liabilities
- keeping a record of your LSL calculations
Having your business’s LSL obligations tracked in this way will help you avoid nasty surprises with liabilities you didn’t know you had. It will also allow you to have more prudent cash flow management, as your updated liabilities will regularly reflect in your financial reports.
Allowances and Benefits
When it comes to the payroll for your staff, there may be added dimensions that can be unfamiliar, even to experienced payroll officers. Things like:
- the interaction between your local and centralised payroll components
- tax-free elements in your remuneration packages
- complex salary sacrifice structures for your team
- multiple different and unusual arrangements for your employees
But perhaps top of the list of challenges is effectively understanding and administering potentially complex arrangements of allowances, benefits and fringe benefits (including exempt fringe benefits).
As you may know, there are many different ways to structure remuneration packages, and some of these structures can be quite complex and potentially confusing – a discussion with your accountant may be helpful to clarify how it all works.
Having this part of your business well understood and administered by your team can help both the smooth operations of your business as well as help to improve the experience of your employees.
Compliance and Communication
Thinking about your business, we believe there are three things that your whole team will appreciate when it comes to your regular pay run:
- having your pay run done accurately and on time (including updates)
- having other compliance aspects of your payroll kept up to date
- having regular and ad-hoc information available for personal budgeting or external bodies
Let’s consider each of these briefly.
When it comes to your regular pay run, a starting check list on the various aspects may include step such as:
- process the regular pay run in your payroll system each period (including any updates)
- where available, upload net payroll payments to your online banking for authorisation
- record and review, as relevant, leave transactions (Annual Leave, Personal/Carers Leave, Long Service Leave, Other Leave)
- review and update any salary sacrifice arrangements you may have
- process time sheets (if you use these)
- process irregular or corrective pay runs
- issue payslips to your employees for each of your pay runs
- ensure that your PAYG liabilities are calculated and recorded
- ensure that your Superannuation liabilities are calculated and recorded
- file your Single Touch Payroll (STP) obligations
Having your regular payroll up to date will really help you and your employees out at the end of the financial year. Your employees will have their STP information ready for them promptly and they won’t have to chase you for it when they are ready to lodge their personal tax returns.
When it comes to other payroll compliance, you may find it helpful to double check you have the following items scheduled for processing:
- Payslips for your team (as mentioned above)
- Superannuation regularly reconciled and remitted (usually monthly or quarterly)
- PAYG remitted to the ATO (as part of your BAS / IAS lodgement)
- Single Touch Payroll (STP) regular and annual filing
Finally, from time to time, your team may be wanting information about their historical payroll or need some other sort of documentation for a bank, real estate agent or government body. By using good systems and processes, you can produce for your team a wide variety of payroll reports or documents that they may need – and you’ll be glad that you have everything sorted.
Would you like to explore further topics related to bookkeeping and payroll in your business or organisation? eBook available now: