Payroll Common Traps

Payroll Awards

Award interpretation

A small minority of jobs and industries are "award free". These employees may be covered by an employee contract or a registered agreement, or have no contracts or registered agreements assigned to them. If they have no agreements in place, and are award free, then the employee is covered by the National Employment Standards (NES).

The majority of businesses are covered by an award. On paying an employee, the he first step in to establish the award they are covered by, and to ensure they are being paid the correct pay rate. Once the award rate is established, you need to determine when the awards are updated, and ensure the updates are applied when they are due to be applied.

You also need to be aware of the "better off" rule. The employer, for example, may twig the rates to encourage more participation in weekend work. If the employee is overall "better off" financially as a result of the changes, then the rates are acceptable. Be cautions however, because if a certain circumstance is to arise where the rates fail the "better off rule", then the payment is in contravention of the award rates.

WARNING: Payroll awards are not easy to interpret. Misinterpreting an award is an easy error to make. This can lead to major fines and penalties for both the business and the payroll personnel. (Regardless of if they are an employee or a contractor.) Ignorance is not an excuse. Fair Work Australia does have the discretion of giving a warning rather than fines. However, I would expect fines are predominantly issued, especially where it can be proved that the employer is aware they are breaching the award rates. As a professional, I risk losing my licence should I make a mistake in underpaying an employee. For these reasons, personally, I would not undertake a payroll without having a subscription to a professional legal advice team that I could discuss any and all instances where awards could be misinterpreted, and any area(s) to which I am not 100% sure. I have been asked in the past to underpay employees, and refused to prepare the payroll under those circumstances. Payrolls are an area where risks cannot be taken.

Withholding amounts from an employee

Withholding amounts from an employee under some circumstances is a breach of the award. If the employee has been overpaid, a repayment plan needs to be negotiated and agreed to in writing by both parties. The employer cannot simply draw the difference the next pay. Another breach would be for example if the employee accidently damaged a company car, or company property. The employer cannot deduct the related amounts from the employee, even with a signed agreement between both parties. Perhaps the employee failed to check the EFPOS charge, and the payment has not gone thru. Regardless of what the employer thinks, to deduct these amounts from the employee is a breach of the act, and Fair Work Australia will prosecute an employer for such actions.

Casual vs part time employment.

It is most important that employers understand how the payslips must be formatted. If the casual rate is not separated from the casual loading on the payslip, this gives the employee the argument that they are not casual, therefore are owed holiday pay and sick leave. This is especially true if that employee can demonstrate to Fair Work Australia any pattern or regularity in their work schedule. (There is a growing trend of this happening.) This could mean that your casual employees may have a claim on holiday, sick and leave loading pay, regardless of what their contract states.

Payroll Service

I have experience processing payrolls for medical surgeries, mining industries, fast food services, and retail outlets. Some of the awards I have worked with are quite complex and demand close attention. I am not afraid of taking on pays using a different award structure. Should you only require assistance setting up the pays, or wish for someone to externally processes the pays, I am happy to assist. As part of the service, I will ensure all the relevant paperwork is maintained and stored in such a manner that nominated personnel can access the paperwork as they need to. Please call to discuss rates if this service is of interest to you.

Employee Rosters

Employees with irregular rosters will be setup using rostering software. A decision will be required as to who handles the rostering. Employees may be enabled via the rostering software to swap shifts with each other if that is your desire. If I am doing your payrolls, I am happy to provide the employee rostering program as part of the service.

Employee record keeping

Fair Work Australia requires that you keep records for seven years. Records that need to be retained include detailed pay slips, employee information (address, ABN, commencement date, permanent, casual or part time, leaves taken, leave cash out agreements, superannuation payments and details, termination info including notice periods, payouts and calculations, contracts, agreements, forms, and any other information pertaining to the employment.)

Pay slip requirements

Employees are to be provided with a pay slip within one day of the payment date. The payment advice must show their gross and net pay. If they are an hourly employee, then also required is; the hourly rate and number of hours worked, loadings applied, penalty rates and other premium payments that have been paid in the current run. Deductions, and superannuation payments must also be shown. Leave entitlements are not mandatory, however this information must be given to the employee should it be requested.

Single Touch Payroll (STP)

Employers with 20 or more employees needed to be setup for Single Touch Payroll (STP) by 31 December 2018. For those with less than 20 employees, STP will become mandatory by the 30th of September 2019. (per ATO website 24 April 2019). STP will used to ensure that employers pay their superannuation and tax obligations on time, and that the paperwork submitted is correct. The ATO will be managing the PAYG payment summaries, and will be using this information to cross reference against the payroll tax, business tax, income tax lodgments, and any other tax type reports submitted to the ATO. STP will also be matched against employee submissions. (to the tax department, Centerlink, and any other government department needing such information.)

PAYG obligations

Warning to employers. A new law has been enacted that allows the ATO to refuse the employer a deduction for wages, for non-compliance with regard to lodging the appropriate legislated payroll paperwork on time. If a payroll deduction is refused, that means that the wages paid become a personal deduction, rather than a company deduction. You will have to pay taxes on these wages, just as if you had pocketed the wage as a personal drawing.