Home Business Payment Planning – How Payroll Works & Why It’s Important to Know

Payment Planning – How Payroll Works & Why It’s Important to Know

by Olufisayo
How Payroll Works

It’s an interesting time to be working in a finance role, with so many processes and procedures shifting in a way that is almost foreign from what it once was. Not many departments have seen the same trajectory as that of finance.

This is particularly true when considering the payroll function, with many savvy businesses exploring different payroll formats that better suit the unique nature of their business.

If you find yourself a little unsure about what payroll is and how it all works, we have fleshed out the intricacies so that your team can gain a greater understanding of how it all works, which will inform better decision making.

What is the core purpose of payroll?

It’s important to remember that there are no silly questions, just silly people who do not ask questions when they are unsure. If you haven’t spent much time pondering the ins and outs of payroll services, then you won’t know how it all works. The function of payroll in business is to balance and reconcile payroll data, while also depositing and reporting for tax compliance.

Taking care of wages, wage deductions and general book/record keeping make up the bulk of a payroll role. This also includes managing the calculation and distribution of overtime, annual and sick leave, reimbursements and bonuses.

       

Essentially, payroll has the critical responsibility of managing the salaries and wages of employees and doing so in a way that is compliant with the ATO. No payroll? No pay for any employees.

What does payroll look like in 2019?

Now that we have covered the basics, we can look at payroll services through a modern 2019 lens. If you have already started to have this conversation with your peers, you will start to notice that payroll is far from a one-size-fits-all, and you likely have different set-ups. Many businesses of all sizes are engaging payroll solutions that offer more agility than their existing models.

These key payroll services will include:

  • Outsourced payroll (which is administered by payroll professionals offsite and not employed by the business)
  • Online payroll (where some of the payroll tasks are automated, and the rest are easily administered through an online platform)

Each option is going to appeal to different style operations, although the outsourced payroll solution is one that feels more ‘hands-on’ to those who are only just exploring modern alternatives. Generally speaking, the size of your business will govern what sort of solution is best.

Why is it important to know?

It’s important to keep abreast of most things happening in your business, but payroll is uniquely critical as it impacts each member of your team, from the CEO to the janitor. It’s also important to know about payroll as the laws are subject to change at any moment, with no sympathy spared for businesses who have failed to get on board and implement these changes.

In 2018, Single Touch Payroll was introduced, requiring payroll operations to upgrade their technology and processes. It also changes how employees completed their tax return and conducted all PAYG inquiries. If you failed to communicate with your employees about this change at the time, you may have contributed to some confusion and stress on their end when the PAYG statement never came via post or email.

       

Payroll is not only the responsibility of one internal or external resource. It should be shared with the greater business, with any changes and insights communicated regularly among the ranks. Business owners and senior management have a top-line understanding of all administrative requirements, but that’s not to say your frontline staff have the same insights.

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