Or.... paying yourself a wage from your company?
While we aren’t in the business of finding your superstar team member, we do make it our business to ensure you keep on top of your obligations as an employer. More than that, we support you along the way and set you up with the most appropriate systems for success.
Part of this support can include referring you to another expert in our network from time to time, and that's why we've worked with The Legal Shop and encourage you to read their "sister" article here.
Once you have a position outlined and budgeted for, here are the steps to take ahead of time so you can focus on showing your new starter the ropes.
1. PAYG registration
You should have your ABN registered or (it’s in the process) by the time you start hiring, so we will need to add withholding from wages as a role to that profile. For this, we need to know:
start date - on or before the first pay run for your crew
Number of employees
Amount you expect to withhold
We can work out the expected withholding from the salary you’re offering, or the hourly rate & roster of each position you’re filling. If you’re paying director wages, we can help you forecast the initial amount.
There's no penalty for incorrectly estimating how much you’ll withhold, this question is to get you on the right reporting & payment frequency.
Most small employers are on a quarterly cycle for PAYGW, and the withholding may be paid on the same BAS as your GST and/or income tax instalments, as applicable. We’ll keep you informed on the details when the due date approaches – don’t forget to budget and keep cash aside to cover the tax payment and the super.
2. Single Touch Payroll (STP)
STP and finalisation is the modern equivalent of "group certificates" or "PAYG Summaries". However, the information is more detailed & sent to the ATO each payday through specialised software.
If you have software for accounting already in use, you may need to upgrade to include the payroll module. If you’re not quite there yet, payroll will be a feature to look and budget for.
If you don't use software that can file STP and you’ll have a team of 4 or fewer for a while yet, there are some free and low cost options – see the ATO's list of options here.
With the software decided, it needs to get ready for work! We can assist with this if you'd like professional help with payroll ongoing, otherwise you will need to decide who will be processing routine payrolls and authorising the data sent to the ATO. This person will need a MyGovlD (not the same as MyGov account used to access Medicare etc), and be authorised appropriately in the "back end" of your business registration (i.e. linked to the employer's ABN).
3. Superannuation
Super for your team (see more here) needs to be paid at least quarterly via a "clearing house" or "SuperStream" software which electronically transmits the contribution details through to employees’ funds and the ATO. This function may be built in to your payroll software, there may be a function attached to your superannuation fund, or we may be able to use the ATO Small Business Clearing House.
Employees' fund details will need to be kept updated & are based on:
Fund account details they provide during onboarding, OR
Existing fund details according to their ATO records, OR
Default fund chosen by the employer (last resort).
4. Getting your crew onboarded
The leading software providers have “self-onboarding” whereby you send your new hire a link, they follow the prompts to do the rest!
If this is not available, they can begin the process through ATO online services (MyGov) and provide the summary of details generated there - the ATO gives a rundown here.
Once their personal, tax and payment details are received and in your system, their pay rate and details need to be added. This should be based on their contract and be no less than any applicable Award. We can help you set up:
Pay calendars/cycles – weekly, fortnightly, monthly – or different cycles for different roles – both the period worked and the day it will be processed and paid
Pay items^ – ordinary hours, overtime rates, allowances, annual salaries and the dollar amounts for each
Entitlements^ – sick and annual leave (including pro-rating for part-timers), RDOs
Deductions^ that may apply for child support, wages in advance or expenses paid on their behalf*
Standard pay for workers on fixed salary or predictable rosters
^the settings behind these are crucial both for accurate calculations and accurate reporting, as the setup can influence the tax withheld, super accrued and how it appears in their tax return.
At the end of the week (fortnight or month), its time to create a pay run, check and import timesheets (if applicable), review and confirm each pay ‘slip’, save the pay run, email pay ‘slips’ to the team, file the STP and organise payment of the net wages either manually or by downloading a bank file to make a batch payment.
It’s got a few elements, and the detail will depend on your pay arrangements and software, but we’re here to help!
Please don’t fall into the old trap of “chucking the guys a rough amount and working it out later” – it’s tempting, but a slippery slope. Not to mention if you overestimate, the costs can spiral, (here's how) and your workers may expect the accidental payrise to be permanent!
At the end of the financial year, the total of the STP is double checked and “finalised” – on the employee side, it will show on their record as “tax ready”. If you’re handling the day-to-day payrolls and perhaps even BASs in-house, we will be on hand to check the categories and totals so your finalisation is final.
There will also be legal and HR considerations to comply with -- notice periods, casual conversions.... Fair Work Award summaries for your industry and the National Employment Standards are a good place to start, or your employment lawyer may be able to assist with contract drafting and more complex issues. Don't forget to check out The Legal Shop's pointers and as always feel free to get in touch with Chromatic with any questions!
* expenses paid on behalf of employees are a whole topic of their own; while we work on summarising the ins and outs of this, suffice to say they need to be after tax deductions unless the employee could claim it in their return if they’d paid for it themselves.
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