Payroll management helps businesses pay employees on time and comply with all tax laws. When done right, your business can save time and money by running payroll efficiently and accurately. However, running it with a gung-ho attitude and a lack of understanding can be time-consuming and fraught with risk.
Visory helps small-to-medium enterprises (SMEs) improve their financial back-office processes, including payroll services. We’ll help you build a strong payroll workflow and best practices. Our team of experts also manages everything from payroll software migrations to weekly pay runs.
Here’s what to know about payroll management for your business and how to strategically build a system that works best for your company’s needs.
What is payroll management?
Payroll management is how your business calculates, tracks, and distributes payroll at your company. It can also help you plan and budget for hiring future employees and growing your business. For example, some payroll platforms also include human resource (HR) functions like onboarding new employees or reviewing performance.
You may use payroll software to manage and automate some parts of the payroll process. But, these tools don’t automate everything. You still need an expert to manage the day-to-day, check for accuracy, and understand your payroll data.
In general, payroll management includes:
- Tracking time
- Preparing pay runs
- Making employee payments
- Calculating superannuation
- Collecting taxes in compliance with government agencies
Why payroll management is important
A well-run payroll management system is invaluable to a company. Without a payroll management system, there may be lost, inaccurate, or late payments, which damages relationships with employees.
It can also lead to costly and avoidable mistakes. For example, employers need to comply with the Australian Taxation Office’s (ATO) Single Touch Payroll (STP) reporting system. For late STP filings, the ATO has a penalty of $210 for every 28 days it’s overdue.
The penalty amount caps out at a certain amount though. Depending on your business size and entity, the amount is capped at the below amounts.
- Small businesses: $1,050
- Medium businesses: $2,100
- Large companies: $5,250
- Global enterprises: $525,000
With the rollout of STP Phase 2 changes, the ATO may make accommodations for businesses that struggle to meet the new standards by the deadline. But, it’s better to be prepared and compliant, so you don’t have to worry about them.
On the other hand, strong payroll management can benefit your business through:
- Accurate and timely payments
- Correct payroll taxes and compliance
- Streamlined pay runs that take a fraction of the time
- Less time and money spent managing payroll and staff benefits
What payroll management does
Payroll management includes all the steps to calculate and remit payments to employees and the government. Tasks may include:
- Collecting new hire payment information
- Organising and tracking time sheets
- Calculating employee wages
- Tracking vacation time, sick time, parental leave, and other leaves
- Calculating tax withholding and remitting these to the ATO
- Tracking and collecting retirement superannuation payments
- Issuing payslips
The payroll management process
There are several phases in the payroll management process including pay run preparation, calculation, reviews, and processing. Optimising each step in the payroll process can help improve your business in various ways.
1. Pay run preparation
Pay run preparation is when you collect all the information you need to run payroll. It can include tax forms at the time of hiring and weekly time sheets.
Here are some other examples of data you’ll need for pre-payroll:
- Hours worked
- Tax information
- Vacation or sick time
- Parental leave
- Employee attendance/absence
- Superannuation changes
- Leave requests and returns to work
2. Pay run calculations and review
When it is time to run payroll, you must take each employee’s gross pay and calculate deductions to get net pay, or take-home pay. Employers are responsible for withholding tax, superannuation, and other funds in each pay period.
3. Pay run processing
Once calculations are finished, businesses must ensure that all money goes where it is supposed to. This includes issuing payments to employees and remitting tax payments to the ATO.
It also includes keeping employee pay records. The ATO requires businesses to keep these records for five years:
- Employee salaries and wages
- Super contributions
- Employee bonuses and tips
- Fringe benefits
Ways businesses can run payroll
How you track and manage payroll at your company often depends on the size and number of employees. In Australia, businesses must use Single Touch Payroll-approved accounting or payroll software. Although software and STP has made payroll easier, it still takes time and expertise to run it accurately and efficiently.
You can make running payroll easier by:
Working with an expert to outsource your payroll services can help to make sure that:
- Processes are compliant
- Time tracking is complete
- Pay amounts are accurate
- Taxes are properly withheld
- Award rates are updated
- Superannuation is correctly calculated
Outsourcing options aren’t only for small companies that lack funds to staff an entire payroll department. Companies of all sizes outsource payroll so they can get valuable expertise that can improve their overall business.
Using payroll software
One of the major benefits of payroll software, other than being a requirement for STP, is that it automates some time-consuming functions.
At Visory, our payroll experts use a range of payroll software, such as Employment Hero, which integrates directly into our platform. Combined with our payroll experts, you get an efficient and accurate process that keeps your businesses compliant and records all in one place.
How Visory helps with payroll management
Running payroll is not the most exciting part of running a business. Visory can help you with payroll management so that you have more time to spend actually running your business. When you work with Visory you get paired with an expert who can handle your payroll, bookkeeping, and other finance needs.
As an outsourced payroll service, Visory acts as your back office for wherever your business operates — in Australia or abroad. To learn more, you can take a product tour or chat with an expert to get started.