So, you’re looking to hire your first employee (maybe they’re already on board!) or are eager to grow your team. This is amazing news, and congratulations on getting your business to this point.
An important thing to be aware of here though, is that there are many legal obligations you need to stick to when it comes to paying your team members – and this all falls under the overarching term of payroll.
So, let’s get stuck in, and take a look at some of the key things for you to know.
Firstly, let’s explore payment timings
This might be a little obvious, but you need to pay your people on time. If you’ve outlined in their employment contract that they will be paid weekly, fortnightly, or monthly, for example, make sure you stick to this.
Late payments are never ideal, and if you’re struggling to pay employees on time, this is a sure sign that it’s time to assess your cash flow.
This means looking at your budget and forecast, identifying areas of overspending, and then exploring ways to cut your costs – think subscriptions that add up over time, equipment loans with high interest rates, switching to more affordable suppliers, and so forth. This could also represent an opportunity to increase your prices!
Tips for figuring out what to pay your people
Make sure you’re paying employees in line with their particular Award as outlined by Fair Work, and/or above the national minimum wage. This varies by industry and other factors, and I highly recommend seeking the support of the HR experts when it comes to this.
Once you’ve figured out what you’ll pay employees, you need to make sure you deduct some of their gross wage for tax purposes, and pay them a net wage with each and every pay cycle. This is known as pay as you go withholding (PAYG), and the amount deducted is sent to the Australian Taxation Office (ATO).
Every employee is also entitled to superannuation, which is 10.5% of their wage. This is paid in addition to their earnings, and needs to be submitted a minimum of every three months.
Some of the key things to include in your payslips
While payments can be simply transferred from your company account to the employee’s nominated bank account, you also need to provide them with a payslip each time.
This can be sent via email, and should also be housed in an online employee portal, so they (and you!) can easily refer back to them. Most accounting and bookkeeping software like Xero and QuickBooks offer this functionality, which means you can access all key financials related to your business in one place.
Some of the key things to include in these payslips are:
- You company name and ABN
- The payment period and payment date
- Their employee ID
- Gross earnings for the period, and to date
- Net earnings for the period, once PAYG has been deducted
- Their hourly rate, even if they are on a salary
- Superannuation payments for the period, and to date
Reporting is key
The government introduced Single Touch Payroll (STP) in 2019, which requires all companies to report employees’ salaries, wages, PAYG withholdings and superannuation payments with each pay cycle.
This is designed to alleviate the burdens for employers when reporting to the ATO, as it’s all done through STP-enabled software. Pretty much all accounting and bookkeeping platforms out there are STP-enabled now, so when you (or your bookkeeper if you outsource) run your payroll, salary, wage, tax and super liability reports, they are are automatically sent to the ATO.
It eliminates the admin work for you, and makes tax time that little bit less stressful, too! It’s a compulsory requirement for all businesses, so make sure you’re practicing this as standard.
Tech is your friend, my friend
I mentioned this a little earlier on, however accounting and bookkeeping software is a no brainer, not only when it comes to things like your invoicing and bank reconciliations, it makes the process of running payroll super seamless.
Furthermore, the fact that they are STP-enabled means your admin time will be dramatically reduced. All of these platforms are affordable, user-friendly, and most have apps too, so you can action key items even on the go (which we know, is all part of small business owner life!).
Don’t be afraid to invest, it’s worth its weight in gold
So, as you can see there are lots of things to keep in mind when paying your people. A lot of small business owners we work with tend to find all of the compliancies a little daunting, and we get it!
You wear so many hats that it can be difficult to keep track of everything. This is where it’s often a good idea to look to the experts. Your bookkeepers, HR team and lawyers can all add a lot of value here, and many operate on a remote model these days, so they are much more affordable than they once were.
The investment you’ll make in these experts will pay off in the long run too, as paying your employees correctly, on time, and reporting in all the right ways, will ensure you and your business are compliant, and therefore protected.
Interested in learning more? Book your complimentary consult in today!