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How to streamline payroll processing

What's payroll processing?

Payroll processing covers all the steps required to manage employee payments, payroll records and ATO reporting requirements. 

If you’re a small business owner, you might handle payroll processing yourself. Larger companies might hire a bookkeeper or payroll manager to handle payroll or outsource their payroll processes.

What are the main functions of payroll processing?

Payroll preparation

You need to open a payroll bank account to pay employees. You should only use this account to pay your employees and hold money for taxes and other payroll-related expenses.

Payroll calculations and deductions

You need to calculate each employee’s gross pay based on their contract, including pay for public holidays, leave and overtime. Payroll software, such as MYOB, can automatically calculate pay, superannuation contributions and other deductions, such as:

  • PAYG (pay-as-you-go withholding)

  • taxes on benefits, including bonuses and allowances

Payroll payments

You should always issue payslips to each employee detailing their gross income, any deductions and their net pay. Payroll software can issue direct deposit payments and provide a portal through which employees can access and review their pay slips.

Payroll record keeping

You should keep payroll records (electronic or paper) for 5 years.

Payroll compliance

You must submit a Single Touch Payroll (STP) report to the ATO detailing payroll payments, super contributions and tax withholding. (MYOB can automatically issue these reports for you).

How do you process payroll?

1. Choose a payroll system

There are three basic payroll systems: 

  • manual payroll (internal payroll processing for small teams)

  • outsourced payroll (a third-party service provider that manages all payroll functions)

  • payroll software (on-premise or cloud-based solutions for teams of all sizes).

Keep in mind that cloud-based payroll software like MYOB simplifies processes and doesn’t require you to manage software security or updates — this service is included in your subscription fee.

2. Create a payroll policy

Before you create a payroll policy, review the ATO and the Fair Work Ombudsman guidelines. Pay particular attention to STP and superannuation requirements to make sure you’re compliant.

Here are some other items to include in your payroll policy:

  • payment dates / schedules, 

  • payment methods

  • timekeeping procedures

  • overtime rules

  • payroll deductions and

  • employee benefits.

3. Collect employee details

Next, you need to collect employee details, including tax file number, bank and direct deposit details and superannuation fund choice. 

If you use a cloud-based payroll system, it’ll typically allow employees to submit their bank, tax and superannuation details through a secure self-service portal, saving you administrative work and empowering employees to manage their own information.

4. Set up time-tracking

Employers have to maintain accurate records of employee hours to determine their pay. You could do this with a payroll system that has an integrated time-tracking and rostering feature. Alternatively, you could use an analog approach, such as paper timesheets.

5. Pay employees

The next step is to run payroll and pay your employees on time. Bear in mind weekends and public holidays as they could potentially delay payments. To counter this, you may have to run payroll a day or two earlier to make sure employees get paid on time.

6. Record and report your payroll

The final step is to update your payroll records. You also need to send payroll taxes to the relevant state or territory revenue office. 

Payroll processing best practices

Automate with payroll software

Forget about error-prone spreadsheets or third-party outsourcing and invest in high-quality, cloud-based payroll software that automates your payroll processes. 

Integrate your existing workflows

Better still, invest in payroll software that brings together other aspects of workforce management like onboarding, rostering, leave and time tracking.

Set alerts and reminders

Schedule reminders for important dates, such as tax reporting deadlines and payroll processing days. 

Secure employee data

Cloud-based payroll systems use the most advanced security measures to protect sensitive employee data. Rest assured your data is protected against cyber-attacks, data loss or compromise. 

Enable employee self-service

Cloud-based payroll systems offer self-service capability so employees can submit their personal information, tax file number, bank and superannuation details through a secure online portal. 

Stay compliant with payroll legislation

It’s essential to stay up-to-date with current payroll legislation, tax updates, labour laws and other government policies to stay compliant. However, it’s not always easy to do this. Cloud-based payroll software can lighten the load, automatically updating to reflect changes as they occur. 

Automate payroll processing with MYOB

Payroll processing is a critical operation for any business — there's no room for error. For effective payroll processing follow these best practices: 

  1. Automate with payroll software

  2. Integrate your existing workflows

  3. Keep track of important dates and deadlines

  4. Set alerts and reminders

  5. Secure employee data

  6. Enable employee self-service

  7. Stay compliant with payroll legislation

With MYOB’s cloud payroll software, you can automate your payroll processing and have the peace of mind that you have everything covered.

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