Payday on time, every time

From compliance issues to disgruntled workers, a payroll mistake can be costly and embarrassing. Here are some tips on how to get the most out of your payroll system.

Payroll might seem like a back-room activity but it has a huge impact on a business if not done well. Obviously, compliance with federal and state legislation and regulation makes sense. The penalties can range from financial to criminal for non-conforming businesses. Purely from a risk management perspective, it pays to get payroll right.

“In recent Talent2 implementations we’ve found companies non-compliant in many areas of their payroll. The industry is changing and companies are not keeping up with these changes,” says Glenn Anthony, national sales director, Payroll solutions at Talent2.

Another very important aspect of payroll is that employees expect to be paid, correctly, on time and without issues. Payroll can tend to be overlooked when it is going well. People assume they will be paid correctly, with no exceptions.

The risk of not doing so definitely affects your business because you may lose the ability to retain good people and to hire the right people hen you need them. An employer of choice is hardly one with payroll issues.

Latest trends

The industry is currently at an interesting crossroads because experienced and knowledgeable payroll people are in limited supply. Both the government and private sectors are finding it difficult to replace experienced workers. This reflects the payroll skills shortage that started to emerge a decade ago.

As a pioneer of web-based payroll applications and over 20 years of payroll processing know-how, Talent2 has witnessed the evolution of the industry, starting in the 1980s when most payroll outsourcing models were based on using technology and computes to handle payroll. It was typical for payroll data to be sent offsite for calculation and then returned to the client.

By the early 1990s, there was the introduction of standalone programs which could be housed onsite and handled by onsite personnel. Although advances in technology helped to drive the changes in payroll, it was the lack f onsite backup facilities and onsite IT employees that made many companies question the need for onsite payroll systems. This led to the rise in payroll outsourcing.

The changes in the local payroll industry are similar to those experienced in t he US and UK, where more value-added services are being adopted through outsourcing, allowing companies to focus on their core business.

Giving rise to the changes are these emerging trends:

• Consumer requirements changing faster
• Moving from an industrial economy to a people-driven services economy
• Labour force growth in decreasing at a rapid rate
• Employees are more mobile
• Retention of Gen Y workforce is an issue
• The rate of orgainsational change is faster
• Customers are more demanding
• Globalisation of products and services
• Technology is impacting how we work and live.

“The move to payroll outsourcing is generally led by a compelling event, be it increased penalties for non-compliance or loss of key payroll person in-house,” says Anthony. “The enhanced security capabilities available, like encryption and anti-tamper software Talent2 has in place, has enhanced market confidence to outsource.”

In addition, with so many checks and measures in place when payroll is outsourced, you can really measure the factors that matter such as quality, quantity, cost and timeliness.

“The issue isn’t whether to outsourced or stay in-house but how to manage payroll correctly while keeping pace with core business issues. An internet connection is all that is needed for managers and employees to access their date from anywhere in the world when they want it. We find payroll outsourcing suits many businesses seeking to gain control rather than the opposite,” Anthony adds.

Legislation and more legislation

In payroll today we can be sure of the need to account for new taxes and legislation, historical taxes and legislation, differences between state and federal systems, and overseas obligations. The payroll tasks undertaken by the average business can be overwhelming of the uninitiated. These tasks can include; superannuation contributions; workers compensation; federal awards; state awards; PAYG; certified agreements; workplace agreements; Enterprise Bargaining Agreements; payroll taxes; fringe benefits; termination payments; travel and accommodation allowances; and auditing requirements.

A well-designed payroll system should automatically integrate any legislative changes into the application. For example, Talent2’s payroll system has inbuilt mechanisms to account for changes dynamically so clients are guaranteed to be compliant. When new updates take place, Talent2 notifies its clients via the login page of the payroll system.

“We’ve found companies non-compliant in many areas of their payroll. The industry is changing and companies are not keeping up with these changes”- Glenn Anthony

So great is the need to improve client understanding of compliance that Talent2 also has a training manger to educate Talent2 employees on legislation and keep their payroll knowledge up to date. Anthony adds; “Our training manger enhances the knowledge of Talent2 employees, who in turn share their knowledge with our clients. We saw void in the industry for good quality payroll training in a fast-moving legislative environment.”

Penalties for non-compliance hurt

The Australian taxation office enforces heavy penalties (administrative, civil or criminal) for non-compliance to encourage companies to meet their payroll and record-keeping obligations. One area of particular complexity is meeting superannuation obligations because super funds all have a different way of processing (eg, cheques, EFT, BPay, electronic format in particular format, handwritten schedules and per-formatted schedules). Unlike payments summaries, which are reported in only way, there is no government regulation on t he reporting standard for superannuation funds.

Regulation and standardization would help those that manage their payroll in-house just as much as it would help outsourcers, but this seems a long way off.

It is too easy for a company to run a payroll system that could have been implemented 10 or more years ago without even being aware they are non-compliant.

“Unfortunately, non-compliance [can be] caused by legacies and misinterpretation [that] are not allowable factors for escaping penalties. Our approach is to work with our clients to notify them of any legislation which may affect their payroll and arrive at the best solution in each case,” says Anthony.

“If more companies started acting strategically they would minimize their risk and leave their business less exposed when unavoidable evens dictate a need to change. Actively planning the transition to outsource can lessen the transition risk.”

Technology is driving change

Technology is not invaluable in managing compliance and delivering real time savings by removing repetitive paper-based processes. Due to the compatibility of different systems, automation has enabled many areas of payroll to be streamlined and integrated, eg, leave applications, rostering, handling arrears and reporting. System compatibility has enhanced flexibility for employers and employees to access and manage their date in the way they choose.

Technological advances have also given rise to value-added services like Employee Self Service (ESS), which enables employees to maintain their own records online and download their payslips. ESS allows companies to reduce the paperwork associated with routine tasks such as leave applications and payslip delivery security.

Automating the payroll industry has real, identifiable benefits. These are:

• Less Labour intensive
• Improves quality control over the manual procedures
• Improves efficiency which saves money
• Provides virtual access at any time of day or night
• Gives managers time to focus on their core business
• Assists with reporting capability
• Assists with compliance obligations
• Improves transparency
• Secures payslip delivery
• Easy to tract any problems or requests and receive feedback on enquiries

“Technology assists outsourcers to provide IT support to remote clients by shadowing their computer to help them through any difficulty. Talent2 is aware of any skills shortage and keeps investing in its services, systems, experienced payroll personnel and security to better support our clients’ needs for fully outsourced payroll management,” Anthony says.

PAYROLL SHOPPING TIPS

• Know what you want- Define your requirements and budget
• Search widely – Use multiple sources to ensure that you will not overlook offerings
• Shortlist quickly – eliminate solutions based on mandatory requirements and budget
• Seeing is believing – do not take the vendor’s word for it. Use your own data when trying software
• Stick to your shopping list – Vendors are going to try to sell you their entire range of HR products. Always keep in mind what you really need and do not get distracted by the extra bells and whistles being offered
• Get everything in writing – Verbal promises are quickly forgotten. Protect yourself by having all the details and conditions written down
• Ask for help – Enlist consultants where you do not have the time or qualified resources.

[Source: Human Capital]