There is so much involved in paying a staff member, from tracking time, getting hourly rates right, to PAYG and Super. It can be quite overwhelming for someone who has never paid staff before, actually even if you have paid staff before. Having learnt everything that you have already learnt from my previous blogs the overwhelm shouldn’t be too bad, but it may be a bit confusing.
Choosing your Payroll Software
The first thing that you need to do is choose the software that you are going to use to process payroll. Please do not think about doing it manually on a spreadsheet or even in a book, there is just way too many compliance issues that you have to conform to.
The easiest thing to do is to use the payroll section of the accounting program that you are using. This may involve increasing your subscription payment or purchasing the next level up. But please make sure that it is compliant with everything that the ATO needs it to be compliant with.
Your Payroll Software should be able to do the following:
- Process the Pay Run seamlessly
- Handle pay schedules so you can process pays, weekly, fortnightly or monthly
- Be SuperStream compliant
- And moving towards being SBR complaint (more on this later)
Other options for your payroll software can be:
- Employee Self Service – where your staff can lodge their own timesheets, request leave, download their payslips
- Integration with your HR software and Invoicing software
There is standalone payroll software as well, I use one for my clients in the hospitality industry and it is an amazing program, incorporates the award into the software so all I have to do is enter the staff timesheets into the system and it calculates everything else, overtime, shift break allowance, meal allowance, after 7 allowance etc etc.
Don’t be afraid to use a standalone program, especially as the number of staff you have increases or the more complicated the award gets. Just make sure that they still meet all the requirements above. You will also need to enter the payroll into your accounting software via a journal, so you will need to make sure you get this right as well.
For me there is no real difference between a cloud based system and a desktop system, unless you specifically want/need the flexibility of having to log into your payroll software when you are not onsite at your office. There is an advantage of having a cloud based software at the end of the financial year when all the updates are done automatically instead of having to update manually with your desk top version.
Setting Up and Learning the Software
Once you have worked out what software to use to process your payroll you then need to set it up and make sure it is up to date with all the relevant tax rates etc. If your program is cloud based then you don’t have to stress, but if it is a desktop version then you will have to check in the payroll preferences section if the tax tables are up to date for the current financial year.
You then need to set up payroll categories/items, this is making sure that the predefined ones that are set up cover what you need. If you have a casual worker you will need Casual Weekly, Casual Saturday, Casual Sunday, Casual Public Holiday. If you have a full time or part time worker you will need Weekday Hourly, Saturday Hourly, Sunday Hourly, Public Holiday, Annual Leave, Sick Leave, Long Service Leave, Overtime 1.5, Overtime Double.
Now here is where the New Employee packs that you made up and got your new staff members to fill in and return come in handy as you need to set up each of your staff. Each payroll software may ask you slightly different questions, but the answers should all be in these packs. Things like:
- Date of birth
- Contact number
- Emergency contact
- Banking details
- Tax file number
- Are they claiming the tax free threshold or not
- Do they have a HELP debt or not
- What superannuation fund are they with
- What is their member number
- Are they going to join the Workplace Giving Program
Then you need to set up their pay rate, you will have this information already from when you did their employment letter. This is also where you add any allowances that need to be added and deductions that may need to occur.
If your software allows there to be an Employee Self Service area you need to send them a link straight from the program to their email so they can set themselves up. You may want to do a policy around the use of this, most Self Service areas allow for applying for leave and other things, if you do not want this to happen you need to advise your staff of the correct procedure for applying for leave.
Now is also a good time to set up their HR file, earlier you would have worked out where you are going to keep this information (filing cabinet, folder on shelf etc), keeping in mind that all information needs to be kept for 7 years. Fill in the Tax File Declaration form and send the ATO their copy and you keep a copy in the staff members HR file.
Once everything is set up processing payroll is quite easy (for most of you, if you have a complex award it can get quite tricky). You need to find a day that you will be processing pays and paying your staff on, making sure that you are compliant with the award that you are operating under. This day needs to be the same day every process. There are lots of people who live pay cheque to pay cheque and need to have routine around their pays.
You cannot decide to pay them one week and then the next fortnight and then the next week either, if you choose weekly processes then they need to stay weekly processes. If for some reason you want to make a permanent change to fortnightly, then you need to give your staff plenty of notice that this is going to happen.
In order for you to process pays you need to have your staff times for the week. For some of you this will be easy as they will have permanent hours, but for some of you, your staff will need to submit a timesheet for the hours they worked.
There are a few ways timesheets can be submitted, either using the Employee Self Service area of you payroll software, filling in a physical one as they work each shift, or using something like Google Docs to fill in a spreadsheet.
Once you have collected the timesheets you will then need to process your payroll using your software. Make sure you review it, that the hours and allowances are correct, so if one of your staff members questions it you know it is correct according to their timesheet and the award.
Then the final steps are to upload an ABA file to the bank for processing or to log onto your bank and pay the staff through pay anyone. I would recommend that if you have more than 5 staff members you look at turning the bulk payments feature on at your bank so that you can load ABA files for payroll, this will save you so much time.
Then you deliver payslips, either via email straight from the program, through your Employee Self Service section or by printing them and giving them to them in person.