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Owning your own business comes with a lot of responsibility. One of the most important parts of managing a business and employing people is making sure they are paid correctly and on time.
Payroll can be tricky to master as it isn’t as simple as transferring the worker’s salary to their account. Superannuation, taxes, overtime and allowances all need to be factored into the process and this can become complicated if you are not up-to-date with the latest laws relating to employment and moderns awards.
What penalties apply to unpaid wages and superannuation?
Mistakes can happen from time-to-time, but a significant failure to comply with Single Touch Payroll, Tax File Declaration, PAYG and Payroll tax may lead your employee to file a complaint with the ATO or Fair Work, which could result in fines and/or audits if non-compliance is found on your business’ part.
At present, an individual can be fined up to $12,600; and a corporate entity may face penalties of up to $63,000 for a breach of the relevant laws.
In cases where the underpayment was deliberate, more serious penalties apply.
If it is found that an individual knowingly underpaid an employee, they may face a penalty of up to $126,000; and a corporate entity may be fined up to $630,000.
How can I ensure my business remains compliant?
It is a requirement of managing payroll that you keep comprehensive records and that you are able to locate wages and salaries paid, allowances, deductions and other requirements easily. Keeping adequate records will also ensure you are able to prove you are meeting compliance.
You must ensure that employees are being paid at least the minimum wage required for their time worked. Modern awards that cover certain professions are also in place and determine rates for extra payments such as overtime, allowances and termination payments.
There are many intricacies attached to paying wages and superannuation that may not seem obvious to a layperson but that you will need to understand. For example, you should keep in mind that that superannuation needs to be paid quarterly, at a minimum and certain contractors may be entitled to superannuation.
There is no one size fits all approach to payroll management, and you will need to choose the best management system to suit your business’ size and capacity. Employing a full- or part-time payroll manager is not always necessary, especially if you only employ a handful of workers.
If you are starting out and want to manage your own payroll, there are systems that can help you. These systems usually integrate other data such as employees’ personal details and leave balances and can even help you consolidate and run reports on expenditure relating to salaries.
It is crucial that you fully understand how to navigate any payroll system you adopt for your business and that you stay up-to-date with current payroll and employment laws to avoid non-compliance if you choose to manage payroll yourself.
Is It Appropriate To Outsource This Function?
If you run or own a small business, and you do not have the means to hire staff to manage payroll, it is acceptable to outsource the service.
Outsourcing is a great way to free up your business’ time and resources so that you can focus on what it is you specialise in. It can also help to reduce costs and liability as you can leave payroll management in the hands of an expert who will understand the ins and outs of the process and the system.
If you do outsource, you should be sure to only engage the services of a trusted and experienced payroll service to make sure that you are not inadvertently in breach of any reporting or payroll requirements.
Whichever way you choose to manage your payroll, it is imperative that you remain compliant to avoid being penalised.
For more information, speak to an employment lawyer in Cairns today.