STAYING ON TOP OF PAYROLL
in this article:
Payroll management can be complicated and time-consuming. MYOB offers some helpful tips
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Intelligent online accounting software such as MYOB Essentials or MYOB AccountRight include a payroll function
New Zealand has one of the most complicated payroll systems in the world. According to one report, we rank tenth internationally for payroll complexity and fifth for the complexity of government reporting (NGA Human Resources Research, Payroll Complexity Index 2014).
So although it might be easy to get into business, once you start employing people then managing payroll can be a time-consuming hassle that gets in the way of what you should really be doing – growing your business.
Some of the key drivers of payroll complexity in New Zealand are:
- The Holidays Act has complex rules for calculating leave which are open to interpretation and can be difficult to apply correctly.
- Most New Zealand businesses process pay-runs weekly, which means those running the payroll have only a short window to fix errors when they do get it wrong.
- The onus on employers to understand the PAYE system, correctly calculate tax, leave entitlements and deductions, as well as hit their IR payment and reporting deadlines each month to avoid fines.
All these factors can place a lot of stress on franchise businesses, especially individually-owned operators who don’t have the luxury of in-house payroll administrators or who can’t afford to outsource the payroll function. And, worst of all, the onus is on you to get it right. The fines for getting it wrong can make mistakes very expensive indeed.
Payroll is the system that helps you calculate the total amount of money you pay to your employees to meet your obligations under your employment agreements. It’s also all the financial records and data related to your business, for example salaries, wages, overtime, bonuses, deductions and withholdings that the IRD requires you to keep for seven years.
As an employer, it’s your responsibility to ensure that all your employees are being taxed appropriately. It is up to you to ensure new employees complete the tax code declaration to determine how much tax is to be deducted from their wages or salary. You also have an obligation to accurately calculate, deduct and submit payments to the IRD for tax on wages, benefits, bonuses, allowances, KiwiSaver, Student Loan as well as non-IRD deductions like court fines, child support, etc.
And while calculating holiday pay and leave entitlements correctly is straightforward when you’ve got the right systems in place, any system is only as good as the data you enter.
So whether you’re a franchisee or franchisor, here are some payroll tips to help you stay on top of your admin and give you more time to work on your real business.
- Permanent employees are entitled to four weeks of annual leave regardless of what their job is or the hours they work. Make sure you’re calculating a leave rate which is the greater of the employee’s ordinary weekly pay or average weekly earnings. A good payroll system can help you with this.
- Pay any employee who would normally work on a public holiday. Those who do work on a public holiday must be paid time-and-a half as well as given another paid day of leave to use later.
- Leave arrangements, particularly for uneven work patterns, should be agreed between the employer and employee prior to the commencement of employment and documented in the employment agreement.
- Legally, you must have a signed employment agreement in place for all employees before they start work. Not only does this help agree the particulars of the role and what’s expected of the employee; it also helps ensure you capture the right information to give Inland Revenue and set up the employee in your payroll correctly.
- It is also a legal requirement to keep good records of wages, time, holidays and leave. Set up a file for each employee so that all their documentation, such as their agreement, KiwiSaver forms, and tax declarations – as well as leave and performance records – are all in one place and accessible, and keep personal files up to date.
A good payroll system will take care of all elements of paying your employees and automate the compliance changes for you. Even with the most intelligent of payroll software in place, however, it’s critical that you as an employer understand what PAYE is.
In many cases, intelligent online accounting software such as MYOB Essentials or MYOB AccountRight will include a payroll function. Specialist payroll functions can also be tailored to work across an entire franchise system, making it easier for franchisees to access the support they need from their franchisor.
When considering payroll software, ensure that what you pay for really will suit your needs. Even if you outsource payroll, you’ll want a software solution that supports payroll processing so that you can see, collaborate and share your payroll data with your service provider. And whatever you do, you’ll want to be able to share critical information with your accountant and your franchisor so that they can give you the best advice they can. Contact MYOB for more information.
This advertorial is taken from Franchise New Zealand magazine Year 25 Issue 3
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