Paying wages can be a highly complicated process if you employ casual staff working to rosters. Even managing full-time employees requires staying on top of retirement benefits (super), leave and overtime. Much of this can now be automated by the latest accounting software.
What is Payroll?
The ability to calculate wages has long been a feature of desktop accounting software. Despite this, some businesses continue to use spreadsheets to pay staff. This approach can cost the business heavily in time and accuracy.
A general-purpose spreadsheet must be manually updated, increasing the risk of miscalculating income tax, superannuation or number of hours.
It is also a painfully slow method for paying staff. Businesses end up juggling spreadsheets for timesheets, leave accruals, tax tables and completing compliance forms at the end of the year.
An accounting program has a purpose-built section called payroll which records the bank account and superannuation details of all employees, the number of hours worked and their pay grades or rates.
A business owner can eliminate a boring, manual process with payroll which is always up-to-date and compliant, and pay staff quickly and easily. Businesses which get their payroll wrong can face large fines from industrial relations bodies or the tax office.
Another advantage over spreadsheets is that payroll transactions automatically update parts of your accounting software (and more automation is coming). For example, reports such as Profit & Loss and Balance Sheet will reflect the impact of money moving from the business’ bank accounts to your employees’.
What is New In Payroll?
Online accounting software has brought a number of improvements. Desktop accounting software requires an annual update for tax tables for calculating income tax payable, superannuation guarantee rates and other levies. In the past this process has been so troublesome some businesses have hired experts to manage the upgrades for them. (Newer desktop programs have greatly improved the download routine.)
Online software by contrast updates itself automatically and invisibly so a business is always paying the correct amounts of tax. These updates can occur at any time, allowing the software company to add improvements year round.
Online software has also made it easier to track attendance and calculate wages with new features such as timesheets on smartphones. Some accounting programs offer a basic payroll for paying staff and a separate module for more advanced payroll. Below is a list of features available in online accounting software; the options vary by program.
The latest accounting software (desktop or online) can upload employee forms such as tax file number declarations directly to the tax department. Most can also send payment summary annual reports directly to the tax office too.
Employees can use online portals to apply for leave and view details such as timesheets, pay slips, leave balances, payment summaries and so on. Managers can also approve other employees’ leave without seeing the rest of the business’ financial information. Online portals let employees look after their own affairs and reduce the number of requests to your finance person.
Timesheets to Hours Worked
Employees can use their own online portal to record timesheets. It then automatically turns the time and attendance details into wages, reducing the chance of errors in manually typing in the hours. This also makes it easier to see how many hours your staff have worked that day and the net profit after sales.
Pay Staff at Different Times
Payroll apps can use multiple pay calendars so you can pay some staff weekly and other staff fortnightly or monthly. Online accounting software is sold as a single subscription and doesn’t limit earnings, deductions, reimbursements and leave types.
Automatically Connect to Other Programs
Online accounting software can swap payroll information with timesheets, employee scheduling, HR management and costing apps. Desktop software can do this too but has fewer options than online.
Accounting software in some countries (for example, Australia) can automate retirement or superannuation contributions for employees. Instead of paying out amounts to each individual, all contributions can be paid with a single click through a clearing house.
The smarter applications automatically calculate thresholds and caps ensuring the employer is not paying superannuation when it’s not required. This can save employers a considerable amount of on-costs when paying their staff.
Advanced Payroll Features
Businesses with full-time and part-time employees will most likely be happy with the payroll features in online accounting software. Specialist payroll apps that connect to online accounting software add more powerful tools.
Pay Conditions Calculator
This calculator automatically calculates how much an employee should be paid. It takes into account the time of day (day or night shifts), day of week (week or weekend), number of hours worked, time between shifts, shift allowances, public holidays and so on.
The calculator comes with pre-built rules based on government awards which automatically update each year. Pay rate templates cover standard rates, penalty rates and allowances for each age bracket and classification.
Businesses can also create custom rules for unique salary agreements.
A payroll app can automatically apply pay rate increases every year, on a birthday or the anniversary of a qualification.
Payroll apps can turn a tablet such as an iPad or Android device into a time and attendance “kiosk”. Employees can clock on or off using the tablet when they start and end their shifts.
The kiosk automatically creates timesheets based on the employees’ entries and updates the online accounting software.
This is for larger businesses that want to have a fixed location for clocking on and off. Otherwise, employees can use the online portal in the company’s online accounting software using their smartphone.
Staff rosters are far more easily managed in an app than on paper. Payroll apps let employees set their availability and view published shifts from a self-service portal on their smartphone. They also make it easy for managers to compare scheduled shifts to submitted timesheets before approving them.
A business can calculate the cost of a shift based on the awards and pay conditions of the employees rostered to work that shift.
Despite all the advances introduced by online accounting software there are still some areas where desktop accounting software is a better choice. Read Chapter 6: Strengths and Weaknesses to find out which is best for your business.