There are strict workplace laws surrounding payroll, paying wages and the minimum requirements every employee needs to abide by, which is why avoiding payroll mistakes when paying employees and filing PAYG is paramount.
If you’re a new employer, be sure you spend some time acquainting yourself with Australian payroll rules and regulations.
The best source of information to understand your payroll responsibilities and avoid common payroll mistakes is the ATO and the Fair Work Ombudsman.
1) Missing payroll deadlines
Missing a payroll deadline is an entirely avoidable payroll mistake which, frankly, should never occur.
You should have a regular pay run calendar and agreed upon pay schedule which lays out exactly when your employees should be paid.
You have a choice to pay employees either weekly, fortnightly, or monthly, however you may not exceed one month.
- Your payroll schedule should also be understood by your employee and laid out in any employee agreements.
- To avoid any possibility of missing a payroll deadline, simply set up automatic payments through payroll software, such as Reckon One.
- Be sure you issue a pay slip no more than one day after paying an employee.
2) Lack of confidentiality
Payroll data and pay slips contain sensitive and confidential information. It’s your responsibility to safeguard this payroll information while avoiding undue access from third parties.
- Make sure your workplace, files, and devices are secure.
- Limit access to payroll software and data to only those who require it.
- Properly handle any disposal of information.
3) Misclassifying employees
Another easily avoidable payroll mistake is the misclassification of employees. This should never occur.
When embarking on a recruitment drive for your business, be clear whether you’re hiring a full-time employee, casual staff member or a part-time employee etc.
There are differing Awards considerations, employer responsibilities, leave entitlements and payroll tax implications depending on which type of employee you hire.
In Australia you can hire:
- full-time
- part-time
- casual
- fixed term
- shift workers
- daily hire and weekly hire
- probation
- apprentices and trainees
- outworkers
Check in with the Fair Work Ombudsman if you’re unsure of employment types and the related minimum employee expectations, especially when it comes to payroll.
TIP: If your employees aren’t on a salary, or you need to calculate overtime, it’s wise to deploy time tracking software to ensure accuracy in hours worked.
4) Payroll deduction mistakes (PAYG)
PAYG (pay as you go) deductions are an essential part of remunerating your employees and withholding tax on their behalf for the ATO. Ensure you have PAYG setup (without error) for every employee on your books.
PAYG is easily managed through payroll software, so be sure you invest in a solid solution to avoid any potential payroll tax mistakes. Remember:
- Be sure you register for PAYG before you start paying employees.
- Be sure to deregister from PAYG the moment you cease to be an employer.
- Avoid manual payroll processes where possible.
- If you do make a payroll mistake, such as failing to withhold PAYG, read the following Fair Work advice.
- Before processing PAYG or entering into an employee agreement, check that the worker is legally permitted to work in Australia.
- Be aware that PAYG withholding is distinct to payroll tax, which is a state-based tax.
5) Payroll set up
Another common payroll mistake can be found in your payroll set-up. Make sure, regardless of your chosen payroll software, that you set it up without error.
Double check and then triple check you’ve entered every detail into your payroll software correctly and in full. Check all the personal details for your every employee including their TFN, name, bank account details, pay rate etc.
6) Setting up STP
STP (single touch payroll) is a relatively new introduction to the Australian tax scene, which requires all employers to automatically submit payroll information to the ATO through approved software such as Reckon One.
It’s now a requirement for you to submit STP simultaneously each time you pay your employees, within a payroll software solution.
Ensure you don’t make this payroll error by submitting STP through an accounting solution every pay run.
How to avoid payroll errors
Avoiding payroll mistakes is a straightforward affair which stems from appropriate management, error-free information gathering and compliance with the ATO and Fair Work Ombudsman.
Above all else, if you properly manage a modern payroll software app, the potential for such payroll mistakes to occur becomes incredibly slim.
Know your responsibilities
Are you fully aware of your responsibilities, under terms set out by Australia’s Federal Government and the Fair Work ombudsman? Most payroll mistakes can be avoided with a little research.
Run reports prior to payroll
Before processing your payroll, run a report in your payroll or accounting software. By creating a reporting period and running a payroll report, any potential payroll mistakes can be caught ahead of time.
Follow a checklist
To ensure you never make easily avoidable payroll mistakes, make a payroll checklist to run through every time you hire and remunerate new employees. If you need assistance with STP, the ATO have provided an STP checklist.
