Payroll management is undoubtedly one of the most important aspects of running a business. And the last thing you want is for your business to be put at risk because of payroll management oversights.
With so many complexities and regulations surrounding Australia’s payroll legislation, including Modern Awards and National Employment Standards, it's difficult for most businesses to stay on top of their payroll obligations.
Coupled with the complexities of workforce laws, so many business owners operate under the false pretence that payroll management simply involves paying their employees a wage and giving them a payslip at the end of the pay run.
But, payroll goes beyond that and includes many obligations, including Modern Award allowances, Single Touch Payroll and superannuation.
This blog post will provide some tips on how best to manage your business’s payroll, all while avoiding Fair Work breaches.
Why is Payroll Management Important in Australia?
The primary purpose of a payroll function is to ensure that a business’s employees are adequately compensated in accordance with Australia’s workplace pay condition laws.
There are several components to Australia’s national workplace relations, including:
- 11 minimum National Employment Standards
- Modern Awards that apply to specific industries and occupations
- The national minimum wage
- Superannuation obligations
- Payroll tax
Because of the variety of features that make up the payroll process, efficient and accurate payroll management is vital for staying compliant.
With a poorly managed payroll process, you risk costly penalties and reputational damages. With the Fair Work Commission clamping down on non-compliant companies, it’s become more important than ever to ensure that you are on top of managing payroll.
The Payroll Management Process
- Stage 1: pre-pay run payroll processing
- Stage 2: the pay run
- Stage 3: post-pay run payroll processing
Stage 1: Pre-Pay Run Payroll Processing
This is the most important part of managing payroll because it prepares you for your next pay run.
You need to collect your employee timesheets and enter their hours into your payroll system. An important (but time-consuming) step in this stage of payroll management is ensuring that their timesheet aligns with the roster.
This generally involves the process of comparing paper timesheets to the roster to ensure that attendance is accurate. Supervisors typically mark their approval by signing on the timesheet before the finalised timesheet is passed onto the payroll management team.
Without even realising it, you could be spending an excessive amount of unnecessary wages due to time theft - so this is an important payroll metric to track.
All of this processing can be significantly simplified through the implementation of time and attendance software. While the primary function of this management system is to track employee’s work hours, the information can be used to create records for compliance purposes and help you track productivity - essentially minimising the opportunity for time theft.
Beyond that, you also need to manually interpret the applicable Modern Award pay conditions to ensure that you are meeting all your compliance obligations, including:
- Overtime hours
- Penalty rates
Another aspect that must be considered during this stage is checking leave requests. With manual leave request processes, employees typically fill in a leave request handed to their supervisor or manager for approval.
During the payroll process each pay run, the payroll management team must gather annual leave requests, check that employees have sufficient leave in their balance, ensure it's been approved by relevant managers and then have their leave balances adjusted.
Lastly, the payroll management team must make sure that all employee-related deductions are considered, including:
- Fringe Benefits Tax
- Payroll tax
For more on your obligations, be sure to check out our guide to payroll compliance.
The time spent cross-checking leave requests and manually interpreting pay conditions can similarly be made far more efficient through the implementation of automated payroll software (see discussion below).
Stage 2: The Pay Run
During stage two, the payroll management team must send off their payroll reports to the financial managers to review. The financial managers must pay special attention to ensuring that all the compliance obligations have been considered in stage one.
Any prospective errors that are identified must then be remedied before the pay run is finalised.
Once the errors have been remedied, and the approval has been established, a batch file is sent to internet banking to release a timely payment to employees.
Businesses that have implemented cloud payroll software as part of their payroll management system simply have to go through one approval process because compliance is automated - the risk for interpretation errors is completely reduced.
Stage 3: Post-Pay Run Payroll Services
Payroll management doesn’t end after your employees have been paid. The final stage of the payroll management process involves:
- printing and distributing compliant payslips,
- filing payroll records (which must be kept for a minimum of seven years), and
- distributing payroll data and other payroll information to the HR and Finance teams for admin and recon purposes.
This step could be eliminated entirely with a cloud payroll system because all records will automatically be stored in the cloud, employees can access their payslips on the software’s self-service portal, and reports are automatically sent to the relevant departments.
While you don’t have to conduct a payroll audit after each pay run, it’s important to include this in your payroll management process at least once a year to:
- maintain compliance,
- identify non-compliance issues, and
- identify inefficiencies in your payroll management process.
Make sure to check out our free payroll audit checklist for your next payroll audit.
And if you’re managing the process manually, the number of risks associated with those aspects and complexities are high.
Unfortunately, as is the nature of manual calculations, things can be left out, and errors are common. For example, manual interpretations of pay conditions such as minimum hours or the ever-changing allowances could be overlooked.
And beyond this, payroll management teams often find themselves chasing ambiguous timesheets, reviewing shifts against modern award conditions, and reviewing leave requests against employee balances to ensure they’re kept as accurate as possible.
So, not only would you have a more streamlined payroll management process, the accuracy when it comes to compliance is unmatched.
Instead of the traditional management requirements of a multilevel approval process during pay runs, a cloud payroll solution can save time and reduce this down to a single level of approval because the software interprets pay conditions and entitlements and applies them to each pay run.
And if coupled with time and attendance software to track hours, you can manage attendance in real-time without cross-checking timesheets with rosters. Some software solutions even have employee self-service portals so your staff can manage their rosters.
Cloud payroll software will also make the necessary employee deductions (for their net pay), calculate tax obligations, organise superannuation contributions and seamlessly sync with government reporting functionalities such as Single Touch Payroll.
Make sure to check out our entire list of cloud payroll benefits.
Payroll management plays a significant role in ensuring compliance with Australia’s complex workplace laws. However, a poorly managed payroll system will end up costing you unnecessary time and resources, never mind the severe penalties if you’re found to be in breach of your obligations.
So, if you find yourself questioning the efficiency and accuracy of your payroll management system, you may want to consider seeking the services of a payroll specialist.
Here at Pay Cat, our expert payroll specialists have spent decades in the field helping businesses address the shortcomings of their payroll management system through the implementation of cloud payroll software as well as time and attendance software.
Not only can smart cloud payroll software save you thousands of dollars in potential breaches, but it also helps with wage control and compliance management.
If you're interested in seeing how we can help your business make the transition, get in touch with us today for a free demo.