Three payroll blunders to avoid

- February 2, 2024 3 MIN READ


When it comes to summer and seasonal employment arrangements, it can be hard to stay on top of payroll entitlements. Luis Sanchez Castillo, Executive GM Product, Xero, shares how to avoid the worst payroll blunders and stay compliant.

The summer season brings joy and relaxation to many people. But for a small business owner, it can often be the most stressful time of the year, particularly for those in the hospitality or retail industry.

The increased hours and foot traffic mean that small business owners are needing more staff to match the growth in industry turnover, particularly in hospitality. But with staff shortages a consistent issue for Australian businesses, small businesses are needing to stay on their game to ensure they’re providing an enticing offer.

And when it comes to summer and seasonal employment arrangements, it’s not the wage itself that can be the most costly, but the price of getting award rates and entitlements wrong.

Australia’s modern award system is arguably among the most complex in the world. What’s more, employers who intentionally fail to pay their workers their full wages, entitlements and superannuation could now face criminal penalties under a federal government crackdown. While employers who make honest mistakes could be exempt, it is vital to get payroll right to avoid any legal and financial risks.

We know that more than half of small business owners find staying on top of regulations or awards requirements stressful and confusing. And when it comes to paying staff,  there are some common payroll blunders that can be costly to your bottom dollar.

So here are some tips on how best to avoid them and how to build a solid plan when running payroll to manage the busy summer period.

Payroll blunder #1 – You’re still relying on your pen and paper roster

Who remembers the days of waiting for the roster to be pinned to a board in the staff room? There’s something nostalgic about drawing up a roster with pen and paper, and even familiar when using a spreadsheet. But these are manual processes that can lead to errors and can be time-consuming.

Digitising your staffing processes helps simplify the rostering experience, which is especially helpful if you are taking on more Christmas casuals. For small business owners, you can make changes quickly and efficiently with digital rostering software, particularly when you need to manage last-minute shift swaps and sick and annual leave requests.

Ensuring you are paying your staff correctly should be at the forefront of the payroll process, but it shouldn’t become overly complicated or stressful. A built-in award interpretation tool in your rostering systems is also extremely beneficial, particularly for industries such as hospitality and retail, which have multiple working rules and penalty rates.

By integrating this software straight into your payroll, you can easily get an accurate view of how your business is performing during the year’s busiest season.

Payroll blunder #2 – Not getting the right information from your employees

When bringing on new seasonal hires, many small businesses often overlook the importance of gathering comprehensive and accurate employee information during the onboarding process. This oversight can lead to an array of payroll issues. For instance, if an employee’s tax file number (TFN) or superannuation details are incorrect or missing, the business could face penalties for non-compliance.

Inadequate employee information can lead to overpayments or underpayments. If an employee fails to provide the correct bank account details, their wages may be deposited into the wrong account, leading to unnecessary complications and delays in rectifying the payroll errors. Manual and extensive reconciliations by owners can divert much-needed attention away from core business activities.

Creating an employee onboarding checklist and investing in employee management tools can help to ensure smooth payroll operations. It is just as important to maintain accurate and up-to-date records for each employee, including personal information, tax forms, banking details, salary history and any relevant employment agreements, and regularly audit and verify these records to avoid discrepancies.

Payroll blunder #3 – Not getting the right data when converting to a new payroll software

Starting to use (or even changing) payroll software can sound like a daunting task. If you are transitioning to new software, the accurate migration of data can be challenging. If historical pay records, leave balances and tax information are not transferred correctly, it can lead to overpayments or underpayments, financial discrepancies and potential legal issues.

Prior to migration, it pays to conduct a thorough audit of the data to be transferred to ensure that all relevant employee information, pay history, tax details, leave balances, and superannuation records are accounted for. It might help to engage an accountant or advisor who specialises in data migration, to ensure a seamless transition, minimise errors and maintain compliance with payroll regulations.

The summer period should be a time for growth and opportunity, not undue stress for small businesses. By planning effectively for payroll, setting up vigorous onboarding processes for new employees and ensuring they have the right data when using a payroll software, small businesses can mitigate any costly payroll issues and focus on how they can capitalise on summer demand.

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