Why Payroll Is Critical To Get Right

Why Payroll Is Critical To Get Right

Payroll, or the process of managing employee wage payments, is a critical task for all businesses to get right.

As a small business owner, it’s likely that you’re currently handling payroll yourself, but as your team grows, investing in professional payroll services will save you a lot of time and help you avoid the unexpected costs and hefty penalties that come with getting your payroll wrong.

In this article, we explain the essentials any business owner needs to know about payroll.

1. The critical role payroll plays in your business

If there’s one area of your business to get right, it’s payroll.

Not processing payroll correctly can affect the morale and trust of your employees, who are relying on reliable and timely access to their wages.

Payroll errors can also impact your compliance and have a negative impact on your business’ reputation and financial stability.

2. So, what does payroll compliance mean?

As outlined by government regulations, a business meets payroll compliance by:

  • Making accurate payments and deductions to its employees
  • Providing employees with a detailed payslip showing the minimum requirements as outlined by the Fair Work Australia laws
  • File and pay withholding taxes on time to the Australian Tax Office (ATO)
  • For larger businesses: file and pay payroll tax to the relevant state authorities on time
  • File and report STP to the Tax Office on time
  • Pay other deductions – such as superannuation contributions by the due dates
  • Keep payroll records for at least seven years.

3. Common mistakes to avoid when processing your payroll

Doing payroll to the level required these days can be complicated and time consuming, especially if you’re not a trained payroll services professional.

With so many legal requirements to keep track of, we often see the same payroll mistakes happening, including:

Incorrect wage payments

As an employer, you’re responsible for ensuring that your employees receive the correct wage payments, including all relevant entitlements under their award or employment agreement. This includes any overtime, penalty rates and allowances.

You can find comprehensive information about pay rates and entitlements via the Fair Work Australia website, including their pay calculator.

Incorrect leave accruals

This often occurs when a new employee is set up in the system.

When setting up your employees, remember that leave accrual only applies to full time and part time employees and part time employees need to be set up with pro-rata leave entitlements.

One other step to prioritise is ticking the option for annual leave to be paid out upon employee termination – this will ensure the final payslip calculates the leave owed.

Incorrect or late superannuation payments

Including:

  • Incorrectly calculating super or missing key situations where super is payable, such as for contractors, people under 18, and sometimes for shift loadings and leave loading
  • Not setting up a default employer super fund (or sometimes setting one up but having the incorrect type)
  • And, not paying superannuation by the quarterly due date.

Being clear on these steps, or investing in a payroll services professional, can help you avoid some of the most common payroll mistakes.

4. What happens when you make a payroll mistake?

Payroll is such a critical process for businesses to get right, and unfortunately the consequences for payroll mistakes can be both costly and have a negative impact on your business, including:

  • Being audited by the ATO
  • Receiving penalties and paying interest for superannuation underpayment
  • Receiving penalties and paying interest for late superannuation payments
  • Issues with cash flow due to incorrect employee wage payments and trying to catch up by paying them back pay
  • Fines from Fair Work Inspectors.

5. How to reduce payroll errors and set yourself up for clear and efficient payroll processing

If you’re feeling a bit daunted by all there is to know and get right with your payroll, these simple tips can help to streamline the process for you.

Payroll processing tips:
  • Before you start your payroll processing, it’s essential to make sure you have all the necessary documentation and details prepared and readily available. Taking some time to do this first can save on costly mistakes
  • Setting up a system that tracks all the payroll hours worked will give you clarity and confidence that all employees are paid accurate and timely wages
  • And last but not least, make sure you clearly communicate wage details with each of your employees so they know how much they will be paid and when to expect their paycheck.

6. How outsourcing payroll to a payroll services professional benefits businesses

With payroll playing such a critical role in the health of your business (and being a time-intensive activity), many business owners choose to invest in experts to manage their payroll.

Because payroll service providers live and breathe payroll (and thanks to the help of automation tools), their services are often more affordable than you might think.

This can be a great investment in healthy payroll, and can give you more time back to do what you do best and the peace of mind of knowing that your payroll is in experienced hands.

Depending on who you choose, many payroll professionals can support you with:

  • Working out pay (including benefits and reimbursements)
  • Deducting employee income taxes
  • Sorting out other deductions such as retirement contributions
  • Paying employees
  • Maintaining your payroll records, and
  • Filing taxes with the ATO.

7. Get professional help

So, if you’re ready to spend less time worrying about whether your payroll is accurate, finding the right fit payroll services support can be a game changer.

Maree’s Mobile Bookkeeping provides a complete Bookkeeping, BAS Lodgement and Payroll Service for small business owners. As we work virtually, we service business owners from anywhere in Australia. From bookkeeping services through to payroll services, we’re here to help you take control of your bookkeeping and compliance functions so that you can focus on growing your business.

To find out more about how a professional bookkeeping service can save you time and money, phone Maree today on 0429 363 047.