Friday, 10 Nov 2023
Payroll is a consistent expense incurred by businesses. It ensures the workforce is paid accurate salaries and wages according to their roles and responsibilities in the organisation.
Since it is a complex task that involves calculating individual compensation for all employees, businesses rely on professionals. Bookkeeping companies in Melbourne are efficient in payroll management and help entrepreneurs manage this financial commitment.
The government has introduced the Single Touch Payroll (STP) to make the reporting task easier for small businesses. Businesses have to be absolutely accurate when crediting salaries to the accounts of employees to avoid legal implications. So, here is a small business guide on how to record payroll expenses. It will help entrepreneurs understand the process and ensure effective payroll management.
Payroll expenses are all the costs incurred by the business in order to pay remuneration to employees for their contributions. The standard components of payroll in Melbourne include salaries and wages, overtime bonuses, superannuation, commissions, allowances and reimbursements, and fringe benefits offered to employees.
To record these expenses, small businesses hire bookkeepers who determine the payroll taxes and track employee work hours. Entrepreneurs need to set down the payroll policy to identify the fixed monthly pay date, understand the state regulations for payroll, determine the payment method and develop a timekeeping system for salary calculations.
They also need to gather employee information, such as tax file number (TFN), address, bank account details, employment start date, leave entitlements, allowances, deductions and super amount. Expert bookkeepers Melbourne know that employees and contractors have different tax and super calculation processes. If they are inaccurate, the business can incur penalties from the ATO.
Small businesses have to maintain payroll records and provide payslips to all the employees.
The records will differ for part-time and full-time workers and contractors. The pay rate is set according to the hours completed. In addition, the bookkeepers must retain the proof of overtime hours. The time tracking system creates timesheets for all workers and helps to calculate accurate remuneration. The payroll software has an inbuilt time-tracking system that reduces the workload of professionals.
The leave data of every worker must have details of the leaves taken by the individual and the remaining leaves entitled to them. Some business owners sign an agreement with employees where they offer the workers to cash out their accumulated leave. Your bookkeeper in Melbourne must create a record of this payment along with the date and the pay rate for the leaves that were cashed out.
Business owners must pay super on behalf of their employees that go into the nominated superannuation account. The amount is used by the workers as their retirement fund. The bookkeeper ensures this payment is made before taxes are deducted from the wages. The payroll expense data should include the record of the amount paid as super, the date of payment, and the name of the fund to which the amount is paid.
Entrepreneurs must use the TFN declaration filled out by the employees to calculate the tax to be deducted from their pay.
Your bookkeeping expert in Melbourne will then determine the gross pay (salary without tax deductions) and net pay (salary after deducting taxes and withholdings). The net pay is the amount that is credited into the accounts of the employees.
Once the salaries are disbursed, and the records are created, the bookkeeper has the responsibility to lodge the STP report. It can be done electronically. It gives a report of the wages, superannuation and PAYG to the ATO. The report must be submitted every time the payroll is processed by the business.
Business owners have to withhold a set amount from the remuneration paid to employees and submit it to the ATO. The amount must be reported on the Business Activity Statement. Your Melbourne bookkeeper will also lodge an annual PAYG Withholding report and provide the payment summaries to the workers.
Melbourne bookkeeping companies ensure they record the rate of pay given to the employees. They have to mention the gross and net amount as well as the deductions made from the gross amount. In addition, they need to record the bonuses, allowances and incentives paid to the employees. The payroll records must be kept safely for up to seven years as directed by the ATO.
Payroll processing and management is a time-consuming and challenging task because of the steps involved. This is the reason why entrepreneurs trust experienced bookkeepers in Melbourne for the job. Also, it is essential for business owners to know the process to stay informed and aware of their financial management.