There are so many elements to consider when setting up a new company. It all starts with a ‘Eureka!’ moment – your original idea and concept.
From then there are the technicalities; the business plan, finding the right office, hiring employees, developing policies and purchasing a whole range of things from business names to web domains and furniture.
Throughout this process, what will constantly be on your mind is whether you’re doing this all in the most effective way. But what some new business owners neglect thinking about is setting up a proper payroll structure.
Whilst it may have originally been written further down on your ‘to-do’ list, it’s not something that should be thrown onto the backburner. In fact, from the moment your business has employees, it should be a priority to have a stable payroll structure in place.
So, if you’re about to set up a new company, pick up your pen and move it to the top of your list. Not sure where to begin? Let’s start with learning from other people’s mistakes. Here are the top mistakes we’ve noticed in company payroll structures.
NOT SETTING UP THE RIGHT POLICIES
Without a proper policy guide, not only will it be difficult for your employees to know what’s going on, but it also means more opportunity for errors. Think about the various areas your payroll manager will be dealing with – annual leave, personal leave, maternity leave, commissions, bonus payments, and having to enter all this on software. Without the correct policies in place, errors could potentially incur penalties from the Australian Tax Office (ATO).
If you are setting up a payroll policy for the first time, make sure that you develop an internal policy surrounding payroll. This must be developed as part of the policy guide. If you’re unsure about what the right policies are for your company, seek advice from payroll specialists. It is important that any policy you may have in place is regularly reviewed and updated as your company grows.
TRYING TO DO IT MANUALLY
You may know your stuff when it comes to business and the particular industry you are in, but if you don’t know the ins and outs of payroll and finance, it’s best to outsource. Because there are so many things to think about while setting up your new company, there are just as many when establishing your payroll processes. Why create more stress for yourself by doing it manually?
You better believe you’ll be getting some surprising claims and questions from employees. Take, for example, the ongoing debate/myth that you won’t be paid on a leap year. The Sydney Morning Herald recently put an end to this argument and reported that according to an expert at the Association for Payroll Specialists, it’s simply wrong. While the argument may seem a bit ridiculous, how are you supposed to know whether it’s correct or not if you’ve never done payroll before?
We recommend, for your sake, getting an expert in or purchasing a high quality software program…or both! Trying to do your payroll manually and calculating bonus structures and the like is risky – you are opening yourself up for inevitable mistakes.
FORGETTING IMPORTANT INFORMATION
Do your employees get a car allowance? What about reimbursements? How do you sort out petty cash? All of this needs to be sorted out when an employee starts and must form part of your to do list when starting your business. Try to consider what you would be asking about your pay if you were an employee.
Payroll needs to be a simple process and you can only make it simple by ticking all the boxes and making sure you don’t leave out important details. It’s also important to allow for some flexibility within your policy, which could have a lot to do with the wording you use. For example, according to AmCheck, an American HR company, “instead of stating that all performance reviews will be performed every three months, state that reviews will typically be performed quarterly.”
NOT GETTING THE RIGHT ADVICE
It’s evident that most common mistakes could have been avoided by seeking the proper advice from payroll experts.
Still not too sure who to talk to? Try a business advisor, the ATO itself, or a financial advisor to make sure you’ve set everything up correctly. Don’t be afraid to go to them more than once. In the case of payroll, it’s not worth taking the risk.
The last thing you want is to suddenly be hit with unexpected penalties simply because you didn’t calculate something correctly!
To make the decision that’s right for you and your business, take advantage of the knowledge and expertise available to you. And don’t forget, here at i3Group we are able to offer you all the help you need. Give us a call today on 1300 725 647 and our staff will find you the right solutions and/or starting points.