Did you know that doing your own payroll can end up costing your business? Here’s some tips on how to stop DIY payroll from costing you.
By sheer financial necessity, many small business owners try to perform as many administrative tasks themselves as they possibly can, in the belief that a bit of paperwork here and there is nothing more than a slight inconvenience.
Some of the seemingly simplest tasks, however – such as paying employees weekly or fortnightly (commonly known as payroll), as well as contractors according to agreed terms – are much more convoluted, and risk-laden, than at face value.
“Australia’s taxation system, due to the numerous legislative requirements that accompany it, is one of the most complex in the world,” a blog on the Sage MicrOpay website warns.
“To ensure compliance, all businesses must keep abreast of the latest adjustments to laws that affect payroll and taxation.”
Some of the best methods of keeping up to date, according to Sage, include: choosing a payroll software provider that supplies software updates when any legislative changes occur; attending payroll seminars covering the latest payroll legislation; and joining a payroll association.
“This is particularly important prior to the start of the new financial year when new regulations such as changes to tax rates, introduction or cessation of levies and adjustments to Modern Awards generally come into effect,” the blog says.
Carmen Morris, who started her own Melbourne bookkeeping business in January 2013 specialising in Xero accounting software, says understanding the rules of the game and structuring your processes to ensure compliance “is not that difficult if you take the time to learn and understand or enlist the help of some payroll and HR specialists.”
Two particular items to keep in mind, according to Morris, are which Awards your employees fall under, and the requirement to keep certain payroll records for a specified period.
“One of the important things to understand about Awards is that they specify a lot more than just the minimum hourly rate,” she says in an article on the Savvy SME website.
“They specify the other conditions such as loadings, allowances, overtime, the frequency of payment, termination, the threshold from which superannuation is payable, your choice of default superannuation funds and standard hours of work.”
“It is (also) mandatory for an employer to keep certain payroll records for a period of 7 years.”
“The most basic requirement for any employer is to pay their staff the right amount at the right time,” Melanie Zander, the founder of MJ Accountants in Coffs Harbour, says in her “Money with Melanie” blog.
“Failure to do so will not only create a great deal of internal dissatisfaction, it may also lead to a government audit.”
“It is critical that you stay up to date with employment law,” she says. “The devil is in the detail with payroll processing and it is critical that you maintain detailed records and consider all aspects of the employment agreement.”
“All this detail is the number one reason to invest in a payroll system (including Xero, MYOB and QuickBooks).”