Getting pay or payroll wrong is a major financial and legal risk. Business owners and management are ultimately responsible for any pay mistakes and their consequences, which could be a hefty fine from a Fair Work Ombudsman Inspector, or the Australian Taxation Office, as well as any interest and legal fees.
Mishandling pay can also harm employees’ trust and confidence in the business, which can end up sapping morale and damaging your reputation.Unfortunately, pay errors aren’t rare. A 2018 study estimated 2.4 million Australian employees could be affected by payroll underpayments, at a cost of $3.6 billion.
The combination of good payroll and HR systems will help reduce mistakes and non-compliance, and will make it quicker to identify and resolve any issues.
Here are some common pay errors to watch out for:
It isn’t always easy to ensure employees receive all their entitlements, as payments for base salary, overtime, penalties, allowances, and superannuation can be complex and confusing. Employers can make incorrect deductions without knowing it, so don’t just accept that your payroll system is automatically accurate and payments meet current legislation and awards. Take time to review what payments are being included and excluded, and make sure the amounts are right.
Overpaying your workers can be just as costly and harmful to your business as underpaying. Nearly 70% of audits by the Australian Payroll Association in 2020 revealed overpayments, and some errors cost employers millions of dollars. Overpayments are also hard on employees who are unaware and not in a position to repay the money. In certain circumstances, the business might not be able to recover the money and the employee (or ex-employee) keeps it.
The national minimum wage is the lowest that a worker can be paid. You and your employees can agree to any wage rate above the minimum, but every employee must be paid at least the minimum for every hour they work. Making a serious failure to pay the minimum wage could lead to significant penalties. The Fair Work Commission reviews the minimum wage each year, so you need to make sure you’re up-to-date with the latest rates.
Legally, you can’t deduct money from your employee’s wages unless it’s for a lawful purpose, is reasonable, and the employee has agreed to the deduction in writing.The law makes no distinction between not knowing what deductions are legal and deliberately breaching the Fair Work Act, so employers need to ensure any deduction is lawful and has been discussed with the person. If you are unsure, get legal advice before proceeding.
Working with an accountant can help you avoid costly payroll mistakes and provide you with opportunities to improve your systems and process. Contact us to find out more today.
Does your small business need a new system to manage assets, inventory or customers? Or are you looking to update your website with new e-commerce software or booking tools? The Queensland Government’s new Business Boost small business grants program could be just what you need.
Grants of up to $15,000 will open on 30 July at 9 am and we are expecting these grants to be very popular, so now is the time to get your paperwork ready!
To be eligible for this grant, your business must:
If this is you, please feel free to contact us!
Your purpose is three to seven words explaining why your business exists for your customers; it should be about them, not you. It is a small statement with immense power – your reason for being.
Tesla: To accelerate the world’s transition to sustainable energy.
Netflix: To entertain the world.
Zoom: To make video communications frictionless and secure.
These may be big company examples, but a clear purpose statement is just as important for small and medium sized business.
A well-defined purpose statement is an antidote to narcissistic by-lines of the past… because we know that consumers are wired to take a self-interest and therefore will engage your business if your ‘why’ resonates with them. Thereafter, your purpose will drive the alignment of values and loyalty.
Guess what? Your customers aren’t interested in you making a profit. They’re too worried about their own profit. They are more than happy for you to make a profit – provided you meet their needs first.
The correlation between a business’s ability to serve a higher purpose and stronger financial performance has been proven. So, defining your purpose is a smart business strategy.
Numerous studies have told us that a strong sense of purpose drives team satisfaction, which will help to improve customer loyalty.
Articulating your business’s purpose to your team allows them to see that they’re contributing to something bigger than themselves. Linking your purpose to their tasks and responsibilities allows them to see their connection to the outcome; how their role is contributing to the overall vision of the business and how they’re impacting your customers’ lives.
Getting clear on your purpose will transform your marketing. Being able to clearly articulate why you exist for your customers will tie them to your brand and make them more inclined to refer you to others. When that new customer does their due diligence, i.e. they stalk your website and social media, it’s more likely they’ll develop an emotional connection to your business and buy from you.
Only when your purpose is crystal clear can you articulate it to your team and then your customers and target audience.
Having a clear purpose is also about sustainability. There is mounting evidence that in these times of change and disruption, having a clear purpose will improve a business’s ability to transform and adapt.
So, what’s your purpose? Need help defining it? We can help.
“People don’t buy what you do, they buy why you do it.” – Simon Sinek
If your business provides any of the following services and makes payments to contractors or subcontractors, you may need to lodge Taxable Payments Annual Report (TPAR) by 28 August each year.
The purpose of TPAR is to prevent dishonest operators from gaining an unfair advantage over the majority – Simply, trying to avoid undeclared income.
The Payments you made to contractors for the financial year should be reported (not unpaid invoices as of 30 June)
The Details you need to report for each payee include the:
a. Gross amount paid (including GST plus any tax withheld)
b. Total GST you paid
c. Total tax withheld where ABN was not quoted.
If you fail to lodge by the due date (28 August each year), penalties can apply.
It is important that TPAR is lodged on time and correctly.
If this is your first time preparing TAPR or you are not sure how to prepare TPAR, please feel free to contact us.
Employers should be reporting through Single Touch Payroll (STP) unless they only have closely held payees, or they are covered by a deferral or exemption. There are changes to STP reporting for small employers with closely held payees and quarterly reporting for micro employers from 1 July 2021. This may affect how you report to the ATO.
STP is a new way for small business owners that employ staff to process payroll and report tax and superannuation information back to the ATO. The ATO requires small business owners report the following employee information before or on each pay day:
A closely held employee is an individual directly related to the entity which they receive payments, Think:
From 1 July 2021, employers must report their closely held payees through STP. You can choose to report these payees each pay day, monthly or quarterly.
From 1 July 2021, the STP quarterly reporting concessions for micro employers will only be available to micro employers who meet certain eligibility requirements which now include the need for exceptional circumstances to exist.
Wages for business owners and those related to the business entities need to be decided before the end of the financial year. Careful planning will be required as the ancient tax planning strategy of declaring wages based off profit (usually after the end of the financial year) is a thing of the past.
If you have any questions about this update,or if you would like to ensure you are ready by for these changes, contact us today.
Initially, compulsory superannuation contributions were to increase over time between 1992 to 2002 from 3% to 9%. In 2010 it was proposed the rate be raised and legislation was passed to enable the continued increase of the rate over time to 12% by 2025.
From 1 July 2021, the Superannuation Guarantee (SG) rate will increase from 9.5% to 10%. You will need to consider the potential increased SG costs of these changes going forward and you will need to ensure your payroll systems are up to date to incorporate the increase SG rate.
The effect of the increase on particular salary packages need to be carefully considered to determine whether the additional 0.5% SG contribution needs to be added on top of the existing salary package (i.e. no change to the employee’s take home pay) or incorporated into the existing salary package amount (i.e. resulting in a reduction of the employee’s take home pay). In addition, you will need to consider the effect of the increase in the SG rate on relevant employee awards.
In addition, from 1 July 2021 the annual concessional contributions cap will increase from $25,000 to $27,500. You may wish to remind your employees that concessional contributions made beyond this amount may attract higher tax rates and an excess contributions charge and therefore should generally be avoided.
If you have any questions about this update, or if you would like to ensure you will be ready by for these changes to super, contact us today
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