Australian Payroll Compliance: Are You Confident You're 100% Compliant?

Author Image Written by Garth Belic

There's more to payroll compliance than meets the eye. What does payroll compliance involve and how do you know if your business is 100% payroll compliant?

In February 2020, in the space of a month, we witnessed article after article on national media, the scourge of payroll compliance breaches and more specifically, wage theft and wage underpayments. Woolworths, Coles, Target and in 2019, George Calombaris’ hospitality empire were all exposed for violations of payroll compliance.

Now, these are all well-publicised giants of the corporate world, but what about your small to medium businesses?

Just because it doesn’t get covered in the media, doesn’t mean it doesn’t happen. In fact, the Fair Work Australia website has a long list of media releases that are dedicated to naming and shaming employers who fail to meet their employer obligations and comply with payroll legislation.

With penalties in the millions of dollars for some of these giants, the sanctions imposed if you’re found to be of breach of payroll obligations can be equally as harsh. Which is why payroll compliance deserves the attention and respect it needs to avoid being another employer in the headlines for all the wrong reasons.

There’s much more to it than this. Depending on which state and industry your business operates in, there are both state and federal legislation you must abide by to be payroll compliant.

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  1. National Employment Standards
  2. Modern Awards
  3. Record Keeping
  4. Single Touch Payroll and SuperStream
  5. Payroll Tax

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Regardless of modern awards, employment bargaining agreement or employment contract, the NES applies to all employees in the national workplace relations system. Therefore, all businesses in Australia must ensure that their payroll compliance follows the NES as a minimum standard.

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They cover minimum entitlements around:

  • Base Rates of Pay
  • Hours of Work
  • Rostering
  • Mandatory Breaks
  • Allowances
  • Penalty and Overtime Rates

Fair Work Australia has a useful award finder tool to find out what modern award your business falls under. If your business falls within a specific modern ward, you must ensure that your payroll compliance meets both the NES and Modern Awards set out.

A modern award doesn’t apply only if a registered agreement covers the business. The only caveat is that if the base rates of pay in an agreement are lower than the relevant modern award, then the modern award base pay rate will apply.

Many businesses struggle with interpreting modern awards, and this remains a major payroll compliance issue for many business owners who don’t dedicate time or resources to understanding their employer obligations.

Recently, we’ve seen an uptick in demand for cloud payroll software that automates the process by implementing modern award and NES rules into rostering and time and attendance functionalities to avoid oversight and under/overpayments.

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If your business is subject to an audit, these records must be readily accessible to a Fair Work Inspector, legible and in English. This includes payslips, employment agreements, rosters and timesheets.

It also goes without saying that records can’t be changed unless the change is to fix an error and must not be false or misleading.

These records must display the following information:

  • Employee details including name, commencement date, full-time, part-time or casual employment and if they are a permanent or temporary employee
  • Pay rate or grade paid to the employee, gross and net amounts paid, deductions made from the gross amount, details of any additional payment or allowance that they are entitled to
  • Hours of work including penalty/overtime hours
  • Any leave, in any form, taken.
  • Superannuation contributions

If a business is found not to have kept accurate records, an infringement notice of $6,300 per breach for a corporation can be issued. It’s imperative to understand that it’s unlawful to produce false or misleading employment records.

Records in the form of payslips must be kept confidential and are only accessible by payroll staff, the employee themselves, and other authorised individuals such as accountants.

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We’ve witnessed many businesses that run a manual record-keeping process to run into a lot of trouble when they’re being audited.

Finding specific records and producing requested documentation to a Fair Work Inspector is stressful and inefficient. Some of the pitfalls include:

  • Misplacement of records
  • Inaccurate records
  • Time-consuming to locate specifically requested records
  • Identification of under-payment or over-payment oversights due to manual interpretations of employee entitlements

As a solution, we help match a suitable cloud payroll software to their business needs, automate payroll compliance, and to allow business owners to access accurate records within a few clicks effortlessly. Not only does this ensure that businesses are ready to produce requested documents, but they have the peace of mind that they’re remaining compliant at every step of the payroll process.

If you’re interested, you can get in touch with us to find out what the best solution may be for your business.

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But for the sake of covering our bases, STP is a new form of wage, tax and superannuation reporting to the ATO.

With STP, employees’ payroll information ranging from their wages/salaries to PAYG withholding and super, are sent to the ATO each time you pay through STP-enabled software.

The Australian government recognises the need to shift to digital solutions to improve efficiency, accuracy and timeliness when it comes to payroll compliance. STP as a requirement alone is the reason many of our clients switch to a cloud payroll software that’s STP-approved by the ATO.

But what’s the reason for introducing STP? The answer is payroll compliance. The ATO wants to ensure that your employees are being paid the correct entitlements and keeping business owners honest. This means that super funds are also reporting information to them to ensure that all information is accurate and up to date.

Unfortunately, not all software providers are STP-enabled. So you should ensure you check with your existing provider if you use one or get in touch with us to find out if there are any better alternatives that minimise the least amount of disruption to your business.

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SuperStream looks to integrate the transferral of superannuation money and information across a uniform system between employers, super funds, the ATO and other adjunct service providers.

In the interest of payroll compliance and improved efficiency, this allows employers to:

  • Perform all super contributions in a single lump sum and transaction, even if there are different super funds for different employees
  • Rollovers from one super fund to another and additional contributions can be processed faster and more efficiently.
  • Reduction of lost accounts and unclaimed superannuation money

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If you’re running a business in multiple states, then you’ll need to ensure you register for payroll tax if your total Australian wages exceed a particular monthly threshold according to the payroll tax laws in a specific state.

When your total wage bill exceeds the threshold amount set out about the state or territory, you’ll need to pay a percentage of this as payroll tax.

For example, the payroll tax threshold is $1m in NSW for the 2020 - 21 financial year (due to COVID-19) and will then be $900,000 for the 2021 - 22 financial year. The payroll tax rate is 5.45 per cent.

The state and territory revenue offices conduct ongoing audits and investigations to ensure that payroll tax compliance is being met. There are many employers that fail to meet this every year due to either failing to realise they need to register for payroll tax or knowingly neglect to register despite knowing they need to register for payroll tax.

Beyond this, we’ve found many businesses have failed to take into account the group wages that would put them over the threshold or incorrectly classified employees as contractors. Another primary culprit has been failure to declare fringe benefits and employee share schemes.

We recommend working closely with your accountant or payroll manager to ensure that you haven’t failed to register for payroll tax.

For more information, you can visit the Payroll Tax Australia website where they harmonise payroll tax information.

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If you run a manual payroll process, it’s more than likely that you’re not 100% compliant. With so much media exposure of wage fraud and breaches in payroll compliance and legislation, businesses are identifying and doubling down on auditing their payroll process to ensure that they’re not another headline for the wrong reasons.

When we first engage with clients, we undertake a comprehensive audit of all current payroll processes to identify shortcomings and weaknesses:

  • Are you complying with all modern awards and NES obligations as an employer?
  • What areas can you reduce the risk of breaching payroll compliance legislation?
  • What areas can you automate to maximise accuracy and reduce inefficiencies?
  • How can you remain updated on changes to payroll legislation?
  • How can you move towards a digital solution to improve with all aspects of payroll compliance process?

While most clients understand that they need a cloud payroll solution for saving time and automating the payroll compliance process, there’s trepidation around which software is the best for their business.

Combine this with the fact that the majority of business owners and managers are time-poor, we’ve found that there’s a need for help with finding the most suitable solution.

For 90% of our clients, we end up matching their business with an integrated cloud payroll software that provides an all-in-one solution for workforce and payroll management.

By having employee onboarding, rostering, time and attendance and payroll processing all integrated, we’re able to automate payroll compliance by setting up in-built rules for modern awards and record keeping.

All of our recommendations are also STP-approved and designed to significantly reduce the amount spent on payroll without coming at the expense of compliance and accuracy.

To ensure that clients get the most of their cloud payroll solution, we offer them a full end-to-end service from implementation to go-live to training to ongoing support.

Questions? Comments? Ready to shift to cloud payroll? Get in touch with us to find out more.

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