If you’re running any sort of business, a seamless payroll system is necessary to ensure your employees are paid correctly each period. Typically, it involves tracking the hours worked, deducting money for employee leave and remitting taxes.
Establishing a payroll process helps employers avoid penalties for breaking labour laws and also reduces the risk of discrepancies in your employees’ paychecks. For these reasons, it’s essential to set up a system that makes it easy for employees and employers to track their time.
At Mizael Partners, we work with a range of cloud-based tools to help manage payroll and payroll tax. Read on to learn more about our process to ensure accuracy and record-keeping compliance.
Preparing for payroll
Setting up a payroll bank account is typically the first step. This account should be used solely to pay your employees and will hold funds for taxes and other payroll-related items.
Calculating employee pay
You’ll then need to calculate the gross pay for each employee based on their contract. This should also include public holidays, leave and overtime pay. Quality softwares, such as Xero, Myob Online and Quickbooks can calculate any deductions on gross pay annually — and they also can handle leave requests and timesheets should they be required.
Pre-tax deductions include Superannuation, which is the responsibility of the employer. There are also employee-related deductions employers are liable for deducting as well, which includes:
- PAYG (pay-as-you-go income tax), such as a Medicare levy. This also takes into account the tax-free threshold, tax offsets and any student loan repayments.
- Taxes on benefits, which include tax bonuses, allowances and fringe benefits including housing or the use of a company card.
- Payroll taxes may be applicable if your business faces additional state or territory taxes.
Making payments to employees
Once the net pay has been calculated for your employees, you can then make payments based on the method of payment agreed upon. Payslips should always be issued to each employee which detail their gross pay and any deductions taken from their net pay. An effective payroll software should automatically look after these calculations, process payments on time, and make it easy for employees to review their payslip.
Filing and paying taxes
After calculating tax contributions and deductions, it’s time to file and pay for them. You can submit a report to the ATO each payday that details what employees were paid, what super was contributed and how much tax was withheld.
Keeping all records
Record-keeping is the final step of the payroll process, but also the most important. You should always keep payroll records in case any questions arise and keep records in electronic form of paper of:
- Salary, wages and time worked
- Taxes and deductions
- Employer contributions
Contact Mizael Partners
Whether you’re looking for a company to handle your payroll or bookkeeping, Mizael Partners can help you handle the finances for your small and medium sized business. Our Melbourne based accountants manage your payroll and specialise in accounting for businesses.
For more information, get in touch with one of our accredited accountants today at +61 (0) 466 228 000.