What is payroll tax?
Payroll Tax is a State based tax calculated on wages paid or payable by an employer to its employees and “deemed” employees. All States and Territories are obligated to pay payroll tax based on the following 2012-2013 thresholds:
|New South Wales
Who has to pay payroll tax?
Each employer has an obligation to self-assess their liability on a monthly basis and perform an annual reconciliation at the end of each financial year (due by 21 July). When an employer’s total wages exceed the relevant threshold levels, payroll tax is payable. Employers must register for payroll tax with the relevant State Revenue Office (SRO) where threshold levels have been exceeded.
What is considered as ‘wages’?
Broadly speaking, any remuneration made to employees and “deemed” employees is included as wages. This would include, but not limited to the following:
- Wages, salaries, commissions, bonuses, allowances
- Directors fees
- Fringe benefits
- Payments in kind
- Eligible termination payments
- Superannuation contributions
Payments made to employment agencies for labour hire services, payments for service contracts, and to other third parties may be deemed to be wages assessable for payroll tax. To get a clearer understanding as what may be deemed as wages, refer to the relevant State or Territory SRO website for further clarification.
When is payroll tax payable?
Upon registering for payroll tax with the SRO, employers are obligated to pay tax by the 7th day of the month, following the month in which their wages exceeded the deduction threshold level.
If an employer is liable to pay payroll tax and fails to register with the SRO, penalty tax and interest may be payable on unpaid taxes.
Businesses are often quite reluctant when it comes to changing or replacing their current payroll software. This behaviour has been prevalent even when the existing software has a lot of shortcomings in its functionality as well as adaptability to changing business trends. The process of changing over to a new payroll software is a deterrent in itself as it can be a rather time consuming task with many challenges along the way. Secondly, reluctance also stems from some horror stories where an implementation process has not gone according to plan and in some cases are not even finalised.
To overcome these concerns, a stringent due diligence process should be undertaken before reaching a decision on your preferred supplier. Back ground checks and referees will help allay any concerns. A good provider will have no hesitation in proving at least 3 referees. Pertinent questions that should be asked include:
- Is the payroll software a robust and effective system that provides the outcomes it’s supposed to within a secure environment?
- How successful was the implementation process and what problems did you experience?
- How effective was the vendor is helping you transition to the new payroll software?
- Would you recommend this vendor to other organisation?
Revision in Legislation and Organisational Changes
Another key factor to consider when switching over to a new payroll software is that it must be able to respond effectively to any revisions and changes in legislation including changing responsibilities of the employer. Your software must also be capable of handling organisational changes due to changes in management and/or business policies.
Given the sensitivity of payroll related data, it is absolutely critical that any payroll software systems is securely housed and encrypted where necessary. Ideally an accredited system would be the best option as it has gone through the necessary and stringent safety protocols required to achieve accreditation.
One of the key benefits of a high quality payroll software system is its ability to have an effective HR functionality included within its package. This critical requirement will enable you to effectively manage your human resource function and further save time and improve efficiencies. A solid system should be able to cater for Recruitment, Performance Appraisals, Leave Management, Training & OHS.
If your current payroll software system does not provide you with a “one-stop shop” solution for your payroll and HR requirements, it may be worthwhile considering your options.
One of the major factors that make a business successful is the optimum use of time and resources. It’s prudent to conduct a thorough analysis of all business functions and make a stand on non-core back-office functions. Many organisations are now outsourcing their non-core functions to 3rd party organisations who can perform the task more economically and efficiently. Payroll processing is one such option that consumes a lot of time and with the heavy reliance on accurate compliance, needs to be left in the hands of payroll professionals who understand the intricacies of getting payroll right the first time, every time. Outsourcing your payroll will almost always save you time and money and most importantly give you peace of mind.
The Australian rules and regulations pertaining to payroll are one of the most complex set of rules in any developed country. Effectively calculating ETPs and redundancies are just two examples of the complexities surrounding Australian payrolls. Left in the hands of a novice can result in severe fines and even court action.
Outsourcing your payroll process to true payroll professionals will minimise any potential risk of miscalculation and give you greater peace of mind. Competent payroll professionals are adequately trained and abreast with relevant rules and regulations. As payroll is their core business, payroll outsourcing firms will always have a more efficient and effective process that will ultimately save any organisation time and money. In turn, this enables you to concentrate on your core business activities.
Another key benefit of outsourcing your payroll is not having to worry about internal staff taking leave our being absent due to illness. So many organisations are reliant on the one individual to process their payroll, thereby posing an enormous risk should that individual not be present on the day of running payrolls!
Personal leave build up is one of many challenges faced by any business regardless of its size. As an employer, it is important to keep an eye on the leave balances of your employees as a buildup will incur an increased leave liability on your company’s balance sheet. Just as importantly, it is important that staff are encouraged to take leave to ensure they are performing at optimum levels throughout the year. Below are ways to manage the build-up of any leave.
Pay out excess leave
A slightly expensive but a good strategy to curb personal leave build up is to pay out excessive leave. By law, an organisation can only reduce leave to the statutory leave limit as per the employee’s employment agreement. In other words, if an employee is entitled to 4 weeks of leave per annum, their leave entitlements cannot be reduced below this threshold unless specific consent and agreement has been reached with the employee. As you will have to pay for leave entitlements one way or the other, it may be prudent to pay them when you can afford it. This can also assist in managing staff presence for major projects and avoid a scenario whereby staff are absent for an extended period of time.
Track leave balances regularly
It is highly recommended that managers regularly track leave accruals of their staff to avoid the problem altogether. This can be done at the end of each payrun or end of month reporting.
An effective payroll software system should be able to report on all leave liabilities by department, state, branch and even cost centre level. Some systems can also be configured to automatically populate the report at pre-defined intervals and sent automatically to each departmental manager.
It is important that an organisation keeps the lines of communication open with its employees in regards to leave entitlements. Some companies make it a company policy that employees cannot accrue leave beyond their annual entitlements. If this is the case then employee employment contracts will need to include such a clause. This will then make it a lot easy for organisations to enforce their policy should the need arise. Make provisions to keep employees informed about their leave through portals, updates and reminders. This will ensure that your staff are well-informed and make best use of their leave entitlements.
Managing human resources on a large scale is often an uphill task, especially for multi-national companies. Running an individual human resources department at different locations becomes a very expensive affair and having a single centralized HR department checks the additional costs but complicates the entire procedure to a great extent. Using a human resource management system can help you by reducing costs and simplifying all the aspects of human resource management so that it increases payroll outsourcing.
An ideal human resource management system merges all the different aspects of the HR department. It helps by centralising the data pertaining to the HR department and making it accessible by multiple users from remote locations. HRMS ensures that all the data is up-to-date at any given point of time and is readily accessibly from any location. A HRMS system also enables the HR personnel to easily access reports and other information in a clear and interactive format.
Who can use it?
Human resource management systems can be used by both small and large organizations. HRMS helps businesses irrespective of small or large to access the correct information as and when they require. The use of HRMS plays a crucial role in the development of small businesses as they can spend greater time in data gathering and analysis and less on data recovery. Such automated solutions also help save hours that would have otherwise been spent in paperwork shuffling. Businesses can also see efficiency improvements that can contribute to the bottom line.
Outsourcing non-core business processes, especially complex procedures such as payroll, can make a great difference to the organisation. Many small and medium enterprises often hesitate to outsource their business processes even though it can be beneficial to them. This is mostly because of a few simple doubts or misconceptions. Here are a few of the most common payroll outsourcing myths that hold back businesses from venturing into outsourcing their payroll.
- Sharing confidential information is dangerous
This is the biggest myth that keeps most SMEs from outsourcing their business processes. Sharing confidential information is a necessity when it comes to outsourcing processes such as payroll. But almost all good outsourcing companies sign a Non Disclosure Agreement before proceeding with the project. Also if they do leak out any confidential information, they are legally liable and it will also damage their reputation.
- Always rely on the big wigs of the industry
Cost controlling is the most important aspect of running an SME. When you hire the bigwigs of the industry to get your work done, you will have to compete with other organizations of buying power that far exceeds yours. On the other hand finding a relatively smaller but much more focused team can help you get better value for money while providing quality services.
- Outsourcing is only for big companies
Outsourcing is done with the aim of allowing businesses to dedicate a greater portion of their time to conduct their core business activities. This is an area that is very crucial for the success of any SME. When you outsource your non core business activities, you get more time to concentrate on your core business activities.
Businesses often find themselves in a fix when considering payroll outsourcing services. One of the biggest concerns faced by businesses is risk assessment. This process may involve several aspects such as the reputation of the payroll processing firm, hidden costs and losing control over the payroll process. It is also evident that availing external services for payroll processing is not advisable to everybody. So it is important that you first assess why exactly you are considering payroll outsource.
Once you are clear about your goals, it is time to evaluate the payroll processing company and conduct a cost evaluation of the entire procedure against your current expenses. While hiring a payroll processing firm, you are not buying any products. The payroll processing company will be playing a crucial role in your business, so don’t rush into it. Take some time and hire the right payroll processing company.
Evaluation of service level agreement
While hiring a payroll outsourcing company, make sure that they provide you with a clearly defined service level agreement. Also ask for details on the strategies they will be using to implement payroll processing for your business.
Technology is crucial in the success of payroll outsourcing. It is required both to aid the process as well as communicate important details and information between your business and the service provider.
Request the service provider for references from current clients to better understand what you can expect when you sign a contract with the firm. Customer service is an important aspect of payroll outsourcing, as you’ll find yourself communicating very frequently with the provider.
The basic service costs and additional fees (if any) reflect the market conditions. As such, the payroll market is competitive, so there is a good chance that costs will vary quite a bit across different services.
It is a good idea to prepare a checklist of requirements and expectations before engaging a payroll processing firm.
Managing the payroll of an organisation is one of the most challenging tasks faced by HR professionals. A slight mistake in the process can result in problems for the employees as well as the organization. The importance of a best payroll system is paramount in any organisation especially in the case of small and medium enterprises. Payroll systems save you from the extra effort of payroll processing while making the entire process transparent.
The benefits of a payroll system for small and medium enterprises are clearly defined and the whole process is quite simple and logical. But finding the right payroll solution for your business is the real question that needs to be addressed.
Picking the right service
Picking the right payroll management service can often be a very confusing task. The market is riddled with so many competitive services and all of them claim the best ROI. You could either choose one of the top 5 service providers as the premium involved for their services is often justified by the quality of their service. On the contrary, there are also certain not so well known service providers that offer cheaper plans. Look for one that strikes a balance between affordable costs and reliable customer service.
A payment solution in the form of payment processing software greatly reduces the task of the staff. But payroll software cannot fully replace the entire process on its own. It also requires a professional to handle it and feed proper inputs to generate the correct solutions. The software also requires regular maintenance and updates. All these can add to your expenses. But when the process is outsourced, you can have the benefit of getting your work done in the most convenient and professional manner while keeping your expenses affordable.
Businesses constantly face daunting challenges when managing their human resources. A high amount of accountability is faced by businesses when dealing with aspects such as hiring the employees, providing training, getting consistent performance and adhering to all the employment regulations.
Outsourcing HR activities either partially of fully can help businesses operate efficiently within the resources available. HR outsourcing can help your business meet all the human resource requirements in an efficient and cost-effective manner.
Benefits of outsourcing
By outsourcing your HR activities, you can ensure that your business derives maximum benefits by relieving yourself from the burden of managing a workforce. This enables you to optimize your resources against the changing economy and face the stiff competition for market share with much ease.
HR outsourcing also allows you to benefit from the experience and knowledge of HR professionals and with the consulting services, you can be well-prepared to face any workforce related problems. HR outsourcing is one of the most widely accepted and used methods by a vast majority of businesses worldwide. It enables you to derive maximum benefits from the payroll processing services as employees get paid on time, which is very essential to boost employee morale.
While complete HR outsourcing might not be ideal for all the businesses, outsourcing certain specific tasks such as payroll and recruitment can save your team a lot of headache. Payroll is one of the most primary functions of an organization. The payroll information is both sensitive and important. Using payroll services ensures that your payroll processing needs are met in the most efficient manner and within the stipulated timeframe.
Business strategists are constantly exploring ways to utilise time efficiently. One of the most time consuming recurring activities in any business is payroll management. A small mistake in the process can lead to disastrous results, so it is not difficult to understand why so many businesses today are relying on online payroll management systems to cater to their needs.
Why online payroll systems
Online payroll processing services have become popular recently and many businesses are integrating their payroll systems with online payroll management systems. The main reason for employers preferring online systems over more traditional methods such as punch clocks is to reduce the errors in calculations. Online payroll systems can completely eliminate calculation errors and provide the correct amount of wages to an employee at the correct time. This reduces the time spent on payroll management while providing an increased amount of efficiency and employee satisfaction.
Online payroll management systems reduce the workload on the staff and also eliminate any problems arising from erroneous salary calculations. You can view detailed payroll reports each month by just logging into your account. Payroll reports can also be conveniently accessed on smartphones.
Online payroll systems – caveats
Online payroll systems facilitate quick and easy withdrawal of salaries to the employees. But make sure that you test the system thoroughly before implementation. On the brighter side, most of these systems allow employees to view their pay cheque in advance and add to creating a positive work experience for them.