MYOB Staff

2 years ago

7 key benefits of payroll management

What is payroll management?

Payroll management is how employers pay wages and salaries to their employees. It covers a multitude of tasks, including:

establishing payroll policies
defining remuneration components and packages
onboarding new hires and removing leavers from the payroll system
gathering inputs, like hours worked, and deductions, like pension contributions
calculating and verifying employee payments and tax obligations
running payroll software
distributing payslips
accounting
reporting.

Why is payroll management important?

Payroll management is an essential aspect of any business because it helps improve employee engagement and maintains regulatory compliance. Without an efficient method of paying employees, calculating and filing taxes, and maintaining accounting records, companies run the risk of disgruntled employees and government penalties.

What are the main functions of employee payroll management?

Employee payroll management comprises several functions that help you pay your employees correctly and keep your business compliant with government regulations.

Calculating payroll

The payroll manager needs to check several components when calculating payroll. These include verifying employees’ salary and hourly rates and checking for any overtime hours worked. In addition, they may need to apply for vacation time, holiday pay, and sick leave.

They also need to apply any mandatory deductions, such as income tax and superannuation, plus any optional deductions, like health insurance, an employee may have selected.

Processing payroll taxes

Employers also have an obligation to pay the correct taxes. Failure to pay payroll taxes may result in the ATO applying a penalty. The tax laws authorise the ATO to impose administrative penalties for conduct such as:

Keeping records

The ATO requires employers to keep payroll records for every employee for 5 years.

Employees can then check their payment summary information by logging on to myGov.

Maintaining compliance

Employers need to generate and send Single Touch Payroll (STP) reports directly to the ATO with every payroll run.

What are the stages of the payroll management process?

The payroll management process generally consists of 3 phases:

1. Pre-payroll

The pre-payroll stage is arguably the most important. Any rogue information here can have a knock-on effect in the payroll run.

Payroll managers gather relevant data for the pay period based on defined company policies and regulatory requirements, including:

hours worked by non-exempt employees, including checking timesheets
exception time, like vacation, sick, and jury duty
employee adjustments, such as new hires, salary increases, or changes to benefit deductions and tax withholdings.

The information is then verified and used to process payroll.

2. Payroll calculations

In the second stage, payroll managers calculate each employee’s total gross pay during the pay period and then subtract taxes and deductions for the net pay.

Employee-related deductions include:

Superannuation
Pay As You Go Withholding (PAYGW)
Fringe Benefits Tax.

They also calculate payroll tax for the same time frame.

3. Post-payroll

In the final stage, payroll managers perform several tasks, including:

pay employees
print and distribute employee payslips
file payroll records
distribute payroll information to the HR and Finance teams for admin and reconciliation purposes
pay taxes by the due date.

What are the main methods for managing payroll?

There are 3 main methods for managing payroll:

spreadsheets
outsourcing
software

Let’s look at each one:

Manual payroll management using spreadsheets

The first method is to manage payroll using spreadsheets. It involves creating a payroll template with calculations and mathematical formulae in one or more spreadsheets. It’s better suited to employers with a few employees, like startups and small companies.

But any potential cost savings are usually outweighed by the pitfalls. Manual payroll management is prone to errors, either in the template or failing to comply with payroll requirements. These mistakes increase the risk of penalties and divert attention from revenue-generating activities.

Outsourcing payroll management

The second option is to outsource payroll management to a specialist third-party service provider. They manage all aspects of payroll administration, including tax deposits, reporting, and compliance.

The company sends an updated payment schedule every cycle, and the payroll service reviews and updates all payments and deductions due to each employee. As long as there’s no confidentiality issue, this option removes the headache of payroll management for the company but may come at a higher cost than maintaining accurate payroll with an online solution

Using payroll management software

The final method is for companies to use payroll management software.

The right payroll software saves time and reduces the administrative burden by automating labour-intensive tasks. It allows employers to accurately calculate gross wages, deductions – like superannuation, tax, and annual leave – and net pay while maintaining some control over the process.

Plus, with MYOB payroll software, you can stay in the ATO’s good books by generating and sending Single Touch Payroll (STP) reports directly.

What is a payroll management system?

A payroll management system is a software application that automates payroll management.

It helps businesses:

manage the wages, salaries, tax deductions, superannuation, and other employee compensation benefits
pay employees
deposit employment taxes
maintain transaction records.

Some companies also use a payroll management system to track employee time off or accrual of vacation leave.

You can access a payroll management system either as a standalone application or as part of an Enterprise Resource Planning (ERP) or Human Resources Management (HRM) system.

A cloud-based payroll management system:

keeps your data safe and accessible whenever and however you need it
eliminates payroll complexity and errors as it always uses the latest tax rates
ensures you’re compliant with country-specific regulations
focuses on your specific industry and market needs
gives you real-time visibility and reporting
grows with your business as you expand.

What are the benefits of payroll management software?

There are many benefits of using payroll management software, from saving time to increasing employee satisfaction.

Automatically calculate payroll variables

Payroll management software automatically calculates the correct payroll variables like superannuation, tax, and annual leave. If something doesn’t look right, the software lets you know with a helpful error message.

For example, MYOB PayGlobal includes a powerful Award interpreter that tackles complex award conditions and accurately automates payments.

Save time

Payroll management isn't the most exciting job in the world, and it’s likely your payroll manager doesn’t look forward to the monthly reconciliation. But using online payroll management software can make their job more enjoyable and save them a significant amount of time.

That means your payroll manager will have more time for other tasks, thereby improving your operations and reducing your overall costs. Switching to a cloud-based payroll management system will also reduce the tedious, repetitive work they have to do.

Simplify payroll compliance

The best payroll management software notifies employers about changes in employment or tax regulations that might affect their business. For example, it keeps you updated with tax obligations and new tax changes introduced by the ATO, such as STP and SuperStream, and ensures you’re paying the minimum wage.

Reduce payroll errors

Payroll management software, especially if it integrates with time tracking and HR programs, reduces repetitive data entry and helps prevent human error. Some systems allow employees to submit their bank, tax, and superannuation details through an employee self-service portal, which saves passing information between HR and payroll teams.

Automate time-sensitive alerts

Many payroll management systems offer workflow notifications. If the software detects a data entry error, it sends an error alert to users, so they can correct it before processing payroll.

Improve data security

Payroll data is especially sensitive, as it contains personal information like birth dates and contact details.

The best online payroll management software uses state-of-the-art security to protect employee privacy and company financial data from falling into the wrong hands, which might not be the case if you outsourced payroll to a third-party service provider.

Keeping everything in-house in a secure online environment makes good sense as you can have alerts and mechanisms to prevent leave requests, hours or bank details from being tampered with. But you’ll also have to ensure your policies on data-sharing, privacy, access, and training are watertight.

Increase employee satisfaction

If people don’t get paid, they’re not going to turn up for work. Sounds simple, right? But navigating the reality of getting your entire workforce paid on time and accurately can be very complex.

Payroll management software ensures employees get paid the right amount on time. Plus, modern online systems let employees access payslips, apply for leave, and update their details from any device, and the data will sync in real time. All of which increases employee satisfaction.

What should you look for in the best payroll management system?

Here are the top 10 things to look for when choosing a payroll management system for your business.

Tracks time and attendance

To calculate the correct wages for non-exempt employees, employers must accurately record the hours worked using time and attendance software.

Time tracking is less critical for salaried employees since their gross pay is calculated by dividing their annual salary by the total pay periods.

However, some non-exempt employees are entitled to overtime, in which case, you must track their hours to ensure that overtime work is paid, as mandated by law.

Calculates employee wages

Once gross wages have been calculated, employers must process payroll deductions, including taxes, superannuation, PAYG withholding[7] , voluntary deductions, like health insurance, and mandatory deductions, like child support payments.

Payroll software can manage all these deductions and calculate the employees’ correct net or “take home” pay.

Processes payroll taxes

The best payroll management systems can process all the necessary payroll taxes at the national, state, and local levels. Government agencies must receive all payments within specified deadlines.

Complies with payroll regulations

The ATO requires employers to keep payroll records for every employee and contractor.

As an employer, you have 5 employee record-keeping obligations:

Single Touch Payroll (STP) doesn't change your existing record-keeping obligations. There are no additional records you need to keep.

You must keep these records for 5 years.

Provides employees with pay statements

With STP-enabled payroll or accounting software, you send the required information to the ATO at the same time you run your payroll.

Employees can then check their payment summary information by logging on to myGov.

The ATO uses the STP reports to officially record wages and salaries paid, taxes collected, and superannuation contributions made.

Keeps employee data secure

The best payroll management systems use state-of-the-art security to secure sensitive employee data. They can run updates for you, automate your account security and remediation activities, and inform you immediately about any suspicious or fraudulent activity they detect.

Enables employee self-service

Cloud-based payroll management systems come with an extra benefit – employee self-service.

For instance, employees can submit their bank, tax, and superannuation details through a secure self-service portal. Employee self-service takes a heap of work off your shoulders and empowers employees to manage their details.

Integrates with your existing workflows

Look for payroll management software that can integrate with your existing workflows and processes, like onboarding, rostering, leave requests, and time tracking, so you can operate more efficiently, reduce repetitive data entry, and prevent errors. Or you could combine it with your ERP system for a fully-integrated business, people, and payroll management solution.

Provides analytics and reporting

Payroll software drives better decision-making with comprehensive analytics and accurate reporting that you can control and customise.

You can access key information online, including leave, personal info, payslips, and timesheets, whenever and wherever you want.

Provides anywhere access

The best online payroll management systems provide 24/7 access so that you can manage payroll queries on the go.

Simplify payroll management with MYOB

Payroll management is an essential part of every business. If you don’t pay your employees, they’re not going to work. Moreover, you need to pay them correctly on time to keep them satisfied.

Running payroll can be a tedious, error-prone task, but you can simplify that by using a payroll management system.

You want to look for payroll software that:

tracks time and attendance
calculates employee wages
processes payroll taxes
complies with payroll regulations
provides employees with pay statements
keeps employee data secure
enables employee self-service
integrates with your existing workflows
provides analytics and reporting
provides anywhere access.

MYOB’s cloud payroll software leaves you feeling confidently compliant – Try it FREE for 30 days.

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