Growing your Building company to a place where you have to pay employees is an amazing achievement. However it comes at a cost. Payroll can become a real drain on your time if not managed well.
To avoid this happening to you, here’s some common mistakes to avoid.
Not leveraging technology
Builders are the first to get their hands on a new tool (or ute) if its going to give them an advantage or save them time and Payroll should be no different.
For starters, it’s hard so why not make it simple for yourself by using software specifically designed with payroll in mind and get even greater benefits by integrating it with your cloud accounting software (and job management software such as Tradify!).
Some of the benefits of using a cloud based payroll and accounting software are;
- Calculations done in just a few clicks
- Faster than manual methods
- Payroll & financial data at your fingertips
- No "double entry"
- Saves time
The only issue with using software to manage both your accounting and payroll is that you have to learn how to use it and you have to pay for it. The good news is that it won't take long to figure out the software and the hours saved managing your payroll will more than offset the costs.
While you’re looking at cloud products to save time and hassle, check out Tradify as it will make the job management and time tracking issues go away (typically your accounting or payroll software won't solve this problem).
Chances are DIY wont save you money
Payroll is one of the most important parts of running a business. There are soooo many things to consider (see the list below). If you are trying to build and grow a successful Building business you have enough things to worry about, such as invoicing and finding good help.
When it comes to managing payroll you essentially have two options - you can choose to DIY it or you can outsource it. Data shows us that both options will cost you roughly the same (when opportunity cost is factored in) so if you’ve chosen the DIY route to save cash then you made the wrong call.
Whether you insource or outsource you’ll still need to understand all the following issues and have some decent technology and processes in place to minimise the effort involved so you can save money and focus on other things.
If managing payroll is completely new to you it probably makes sense to get a bookkeeper to help until you feel comfortable managing this yourself or delegating to one of your team.
Whether you insource or outsource the key things to get your head around are;
Know the payroll deadlines and don't miss them
The three you need to know about are:
- PAYG withholding. The tax you withhold from payments you make to employees and businesses.
- Payment summaries. These are summaries of how much you’ve paid each employee during the year.
- Super reporting. There are multiple deadlines for paying and reporting superannuation contributions – make sure you don’t miss them! (You’ll also need to get up to speed with the government’s SuperStream system for superannuation payments.)
Keep up to date with payroll tax changes
Tax rates change every year, and figuring that out at the end of year would really suck.
Numerous Reporting and reconciling requirements
The payroll reporting requirements vary from state to state. Generally, you’ll have monthly payroll tax reporting requirements as well as Annual Reconciliation Forms due with the state every year.
These forms will help you figure out whether you still owe the state, or they owe you a refund if you’ve overpaid. Make sure you review these rules and processes so you’re not making any mistakes!
Not sticking to a process
Builders can be very particular about following best practice while on the building site and the same diligence should apply to Payroll. To try and avoid mistakes follow a process that gets you to think about all the key issues in a logical way.
To help build a process that works for your Building business here are the 16 things you need to regularly do to avoid costly mistakes;
- Check all your employee details are up to date including TFN Declaration Form (sent to ATO?), Super Choice form (sent?), personal details such as bank details, address, next of kin, DOB etc.
- Have you provided your employees with a Fair Work Information Statement
- Have you kept appropriate records and are they easily accessible?
- Have you paid your employee’s superannuation?
- Are you under an Award? Are you paying the correct rate?
- Have you got your staff classifications right – casual, part time, full time, subcontractor?
- Are you familiar with the National Employment Standards?
- Has annual or personal leave been taken recently? Did they have enough leave accrued? Are you prepared to take their entitlements into a negative balance, or will it be leave without pay? Is leave loading applicable?
- Are leave entitlements being calculated at the correct rate? Generally four weeks annual leave per year, 2 weeks personal/carer's leave per year?
- Do the entitlements need to be adjusted? If your payroll is setup to record a number of hours per pay period and your employee works less, you’ll need to make an adjustment for the hours that they actually worked, rather than what you expected them to work.
- Are any employees under 18 years of age? This has superannuation implications – they must work 30+ hours in a week, AND earn over $450 in the month to be eligible for superannuation.
- Are you paying the correct employee? Do you have employees with the same or similar surnames? Check to make sure you’re paying the correct person.
- Are your employees entitled to be paid allowances? Are these being correctly recorded in payroll?
- Was there a public holiday in the last pay period? Did they work that day? Are they entitled to public holiday penalty rates? Don’t just assume what days are public holidays. Fair Work Australia has a list of official public holidays for each year.
- If you record Jobs or Categories, have they been applied correctly?
- Are your payslips compliant -there is certain information that needs to be on your employee's payslip such as your ABN, the employee’s payroll classification, their accrued personal leave hours. Read more here to ensure you’re compliant.
There is no shortage of things to think about when it comes to payroll but if you make use of the tools available, get some professional help when needed and stick to a regular process, you can minimise the level of effort required and free yourself up to focus on running the business.