REPORT - Assessment 3 Manage Payroll

Assessment

Manage Payroll Report

Table of Contents

INTRODUCTION..............................................................................................................................4

1 PROCEDURES FOR THE MANAGEMENT OF A PAYROLL SYSTEM........................5

1.1 Security procedures required to ensure that an employees' payroll information is kept

confidential and secure within the workplace...........................................................................5

1.2 Procedures required to ensure employees' claims for allowances are substantiated......6

1.3 Internal control measures and security procedures a Payroll Manager could set up to

minimise the possibility of fraud in the payroll process...........................................................7

1.3.1 Methods for internal control to prevent fraud include:...........................................7

1.4 Statutory obligations and payroll records are kept as determined by government

legislation..................................................................................................................................9

1.4.1 Statutory obligations that relate to the payment include:........................................9

1.4.2 Employment records.............................................................................................11

2 PREPARING PAYROLL DATA FOR PROCESSING.......................................................14

2.1 Industrial Awards and Enterprise Bargaining Agreements........................................................14

2.1.1 What are enterprise agreements?.........................................................................................15

2.1.2 Rights & rules for making enterprise agreements,..............................................................15

2.1.3 Using awards, contracts and legislation to calculate pay....................................................16

2.1.4 Understanding the award or contract...................................................................................16

2.2 Types of documentation/forms/legislation required to process and maintain employee

payroll information............................................................................................................................17

2.2.1 Types of deduction to be aware of when processing payroll data.......................................17

2.3 Leave Entitlements, Allowances, Statutory and Voluntary deductions for a permanent

Administrative/Clerical worker (any level).......................................................................................18

2.4 Timelines for payroll data to be provided to the payroll officer/process for calculation and

processing...........................................................................................................................................21

3 AUTHORISATION AND MAINTENANCE OF PAYROLL PAYMENTS......................23

3.1 Payroll procedures to ensure that an employee's net wages/salary is correctly calculated........23 of 44

3.2 Company's payroll procedures reconciliation for accuracy........................................................25

Process of reconciling wages, salaries and deductions......................................................................25

3.3 Policies and Procedures Company may use to deal with payroll enquiries...............................26

5 MANAGEMENT OF PAYROLL RECORDS......................................................................28

5.1 Declaration forms necessary to satisfy the ATO's requirements for new and existing

employees...........................................................................................................................................28

5.2 Types of payroll liabilities due to Government and private creditors, how regularly they

should be paid and the necessary documentation..............................................................................30

5.2.1 Payment requirements.........................................................................................................30

5.2.2 Australian Taxation Office legislation................................................................................30

5.2.3 Superannuation guarantee legislation..................................................................................30

5.2.4 Accident compensation legislation......................................................................................30

5.2.5 PAYG Withholding - must be paid on 21st of the month following the pay run...............31

5.2.6 Accident compensation legislation......................................................................................31

5.3 End of Payroll Year procedures in relation to providing PAYG Payment Summaries to

employees and to the ATO.................................................................................................................33

6 REFERENCE LIST..................................................................................................................35

7 APPENDICIES.........................................................................................................................36

7.1 APPENDIX A.............................................................................................................................36

7.2 APPENDIX B.............................................................................................................................37

7.3 APPENDIX C.............................................................................................................................40

7.4 APPENDIX D.............................................................................................................................44

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INTRODUCTION

Managing the payroll is a responsibility that involves high level of security and confidentiality,

as well as a detailed knowledge of organisational and legislative requirements and payroll

processes. A Payroll Manager is responsible to delegate, oversee and undertake the calculation,

process and check payments. Recording and filing relevant documentation, monitoring security

and confidentiality and ensuring timelines are met are also responsibility of the Payroll

Manger. In addition to these responsibilities, a Payroll Manager may also handle human

resource issues such as designing contracts, developing or streamlining payroll policies and

procedures for continued improvement, answering staff queries, training team members in the

organisation's payroll procedures and troubleshooting when required.

To manage the payroll effectively and efficiently, one need to draw on a range of skills

including the ability to coordinate, delegate and prioritise tasks, manage timelines, attend to

detail, minimise errors and resolve difficulties that may arise. The role also requires a sound

knowledge of payroll-related taxation laws, statutory obligations, declaration forms, an

organisation's employment contracts, payment and security policies and procedures and, if

applicable, proficiency in software packages such as Quickpay, Micropay, and Attache.

1 PROCEDURES FOR THE MANAGEMENT OF A PAYROLL SYSTEM

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1.1 Security procedures required to ensure that an employees' payroll

information is kept confidential and secure within the workplace.

Security of payroll information

Security of payroll data and records is essential to ensure confidentiality and must be given a

high priority at all times by payroll processing and management staff. An organisation must

have a series of control measures in place to protect its employee’s information.

Measures that can be implemented to ensure confidentiality include:

R Logging off the payroll system before leaving the computer

R Positioning the computer screen so that unauthorised persons cannot view the display

R Ensuring that confidential information cannot be viewed by unauthorised persons and is

stored securely at the end of each day

R Not discussing the personal details of staff within hearing of unauthorised persons

R Ensuring that only authorised persons are given information regarding staff pay details

R Ensuring data is used only for the purposes for which it was intended.

R Restricted access to electronic and paper-based employees files should be in place

involving password access, locked filing cabinets with keys available to authorise

personnel only, a backup system, files stored in separate locations on-site as well as in

an off-site location

R Maintaining regular reminders about security and confidentiality to those involved, an

audit of security keys from time to time, frequent checks to ensure that only authorised

people have access to these files and that the password is secure. Those working with

such material may be asked to sign a confidentiality form not to disclose the

information with which they are working.

It is important to remember that the internal control systems we follow are not only to ensure

security and confidentiality of payroll data but good internal control protects us and our

organisation, while poor internal control may leave us liable to suspicion or accusation in the

event of an irregularity.

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1.2 Procedures required to ensure employees' claims for allowances are

substantiated

Employees, Claims for allowances must be checked and authorised prior to payment. Many

people incur work related pay expenses for items such as travel, meals, petrol and

accommodation. Therefore employees are able to make a claim for reimbursement that can be

provided in cash by cheque or processed in the employees’ next pay. This will depend on the

organisation’s policies and procedures.

To ensure that claims are substantiated as a true record of expenses, employees may be

expected to complete a claims allowances form relevant to their particular type of claim.

Payroll officer is responsible for formulating, delegating and maintaining procedures to

ensure that:

R The completed form is approved by the employee's supervisor or manager

R Relevant receipts are attached

R Forms are double-checked to verify accuracy

R The form is forwarded to the payroll office

R The claimant keeps a copy

R The claim amount is entered into the next pay run for that particular employee

R Relevant forms are placed in the employee's file.

R Payroll officer prior to payment needs to ensure that:

R changes in pay rates are approved

R attendance sheets approved and checked

R overtime, changes in shifts are approved

R authorisation of overtime, casual pay, annual leave, sick leave , long service leave, etc

R employees’ files should be independent of payroll files

R signed payroll deduction authorisation forms exist

R employees’ must sign to collect pay

R employees’ names should be regularly and spot checked with personnel records

R all payroll transactions are authorised and approved by the appropriate authority

R information used to calculate payroll payments and deductions is up to date and correct

Another responsibility is to regularly review claims forms and claim procedures to improve

accuracy and efficiency, to review the actual allowance to take price rises into consideration.

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1.3 Internal control measures and security procedures a Payroll Manager

could set up to minimise the possibility of fraud in the payroll process

The key to competent, secure and efficient management of payroll is sound internal control

measures. A series of control measures should be in place to safeguard an organisation's

finances. Secure procedures of checks and balances will limit the opportunity for fraud of funds

or the loss of money due to careless accounting procedures, and ensure all employees are paid

the correct amounts due to them.

Control measures relating to the management of payroll must also ensure that payroll data

complies with legislations such as the Workplace Relations Act 1996 (Cwlth), Superannuation

Guarantee Act, and the Corporations Act, ATO regulations, the Australian Accounting and

Auditing Standards and the Australian Securities and Industries Commission requirements.

1.3.1 Methods for internal control to prevent fraud include:

R Maintain adequate supervision of the time clock or time sheet/book.

R Careful calculation of the pay procedure.

R Keep a history card for each employee - name, date of birth, dependents, award rate,

deductions, date commenced etc.

R Separate the payroll duties between as many staff members as possible.

R Arrange work so that as many people as possible take part and the work of any one

person is checked in some way by another. In this way, it takes more than one person to

commit fraud.

R All payroll registers should be serially numbered to prevent loss or addition of extra

entries.

R Authorisation of the payroll calculations before the payments are paid

R Use of pre-numbered cheques.

R Signature or identification of each person collecting his or her pay is essential.

R Strict control over any unclaimed monies or leave of absence records.

R Careful calculation of the pay procedure

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Other important control measures to avoid fraud in an organisation may include:

R Establishing policies and procedures that enable the payroll service to be efficiently and

accurately administered

R Ensuring the overall management of the payroll is efficiently coordinated, and that

appropriate tasks are delegated and overseen to ensure accuracy

R Establishing a system whereby all activities associated with providing a payroll service

are regularly monitored and reviewed

R Reconciling amounts paid with what should have been paid—at the end of the pay

period, reconcile the totals of gross salary, tax deducted, net salaries, superannuation

etc. With what has been paid to the ATO and to employees

R Separating the duties of those involved in payroll services to safeguard against theft,

overpayment, underpayment etc. And verify accuracy, e.g. Ensure a witness is present

when removing cash from a safe, have a dual checking system in which a supervisor

must verify and sign a claim form

R Ensuring that those amounts in addition to salary and wages—such as allowance claims

pay increases, time off, annual leave, deductions—follow the organisation's procedures,

an example is: check that all authorisations is included and filed appropriately so that

it can be referred to later if an amount is queried.

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1.4 Statutory obligations and payroll records are kept as determined by

government legislation.

Statutory obligations are obligations that do not arise from a contractual relationship but are

created under a law. The payroll system must meet all of the statutory obligations. Payroll

manager must be aware of what these are and what records to keep and the time period that

legislation specifies to keep them for.

1.4.1 Statutory obligations that relate to the payment include:

R Pay As You Go (PAYG) tax,

R Superannuation

R Payroll tax

R Medicare levy

R Higher Education Contribution Scheme (HECS) fees

R Insurance

R Union fees

R Child support (please refer to APPENDIX A)

R Outstanding debts deemed by court orders.

Payroll Manager must also ensure that voluntary deductions are taken from the relevant

employee's pay and sent to the appropriate payee, for example health insurance and home loan

repayments. The appropriate documentation must be completed each time a remittance is made

to the appropriate organisation such as the ATO, Superannuation fund etc.

Systems established to ensure statutory obligations are met and records are kept include

R The type of payments the organisation is responsible for such as superannuation

contributions, the payment obligation of each employee

R Where the records and forms (sent to the organisation by the relevant body) are stored

such specific file location at an organisation

R when payment is due, e.g. monthly

R Check that hours are correct prior to submitting to external payroll provider

R Payroll is always processed on time due to statutory requirements

R Total wages for pay period is reconciled and irregularities corrected or referred to

appropriate people for reconciliation

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R Confirm salary sacrificing requirements of staff. Split payments into bank accounts.

This satisfies arrangements for payments in accordance with organisational and

individual requirements.

R Produce, check and store payroll records in accordance with organisational policy and

security procedures. The finance records are generally stored with the chief financial

officer.

R Follow security procedures for processing payroll and maintaining payroll records. A

password is required to electronically submit hours by your payroll department or

payroll provider.

R Respond to payroll enquiries immediately

R maintain adequate documents and records (timesheets, time cards, leave applications)

R keep records then archive and destroy after seven years.

Payroll manager must record and file any notification notices relating to payroll matters that

they receive from relevant bodies, such as an increase in the superannuation guarantee from the

ATO, a notice from an employee requesting an increase in their superannuation contribution or

the deduction of union fees, a court notice requesting specific amounts be deducted from an

employee's pay (referred to as garnishing wages).

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1.4.2 Employment records

Employer’s record keeping obligations are dealt with the Fair Work Regulations 2009 (the

Regulations).

General requirements are that records must:

R Be kept for a period of 7 years;

R Be in a form that is readily accessible to an inspector;

R Be in English and stored in a legible form; and

R Contain the name of the employee and employer;

R The nature of their employment (full-time or part-time, temporary, permanent or

casual);

R Pay; overtime hours; averaging arrangements; leave entitlements;

R Superannuation contributions; termination of employment (where applicable);

R commencement date; the Australian business number (ABN) of the employer;

R Individual flexibility arrangements and guarantees of annual earnings.

Overtime

If overtime or penalty rates may be paid under an instrument or contract of employment – the

number of overtime hours worked, or the start and finishing times of overtime worked.Any

agreement between the employee and employer to average working hours over a period of

time.

Averaging of hours

If the employee agreed in writing to average their hours of work, a copy of the agreement must

be kept.

Remuneration

The basis on which the employees’ rate of pay is determined; details of any bonuses or

incentive payments; the period to which the payment relates; the gross and net amounts paid to

the employee during that period; dates of payment and any deductions made from the gross

amount paid to the employee.

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Leave entitlements

Any leave taken, and the balance of leave from time to time;

If the employee agreed to cash out leave, the employer must keep a copy of the written election

by the employee, the date and rate of payment for the forgone leave.

Superannuation contributions

The amount of the contributions made; the period over which the contributions were made; the

date when the contributions are made; the name of the fund or funds to which contributions are

made; the

Record of the employee’s fund election

Individual flexibility arrangement

If the employee agreed on an individual flexibility arrangement, a copy of the agreement must

be kept.

Guarantee of annual earnings

Where employer provides or revokes a guarantee of annual earnings, a copy of the guarantee

must be kept.

Termination of employment

Include whether the employment was terminated by consent, by notice, summarily, or in

another specified manner, and the name of the person who terminated the employment.

Transfer of business

The old employer must transfer to the new employer all records concerning the employee that,

at the date of transfer or assignment, the former employer is required to keep under the

Regulations.

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Pay slips

The pay slip must contain the following information:

R The name of the employee and employer;

R The date on which the payment was made;

R The period to which the pay slip relates;

R The ordinary hourly rate of pay (if applicable);

R The number of hours worked and the amount of the payment at that rate (if applicable);

R The annual rate of pay (if applicable)

R The gross and net amounts of the payment;

R Details of any payment made as an incentive payment, bonus, loading, penalty rate or

other separately identifiable entitlement;

R The abn of the employer;

R All deductions made from the employee’s gross pay; and

R Any superannuation contributions made on the employee’s behalf

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2 PREPARING PAYROLL DATA FOR PROCESSING

2.1 Industrial Awards and Enterprise Bargaining Agreements

Unlike awards, which provide minimum standards and conditions of employment for

employees in an entire industry, enterprise agreements usually apply only to one employer. The

terms and conditions set out in an enterprise agreement override any corresponding provisions

set out in any applicable award.

Enterprise bargaining is wage and working conditions being negotiated at the level of the

individual organisations. Once established, they are legally binding on employers and

employees. An Enterprise Bargaining Agreement (EBA) consists of a collective industrial

agreement between either an employer and a trade union acting on behalf of employees or an

employer and employees acting for themselves.

On the one hand collective agreements, at least in principle, benefit employers, as they allow

for improved "flexibility" in such areas as ordinary hours, flat rates of hourly pay, and

performance-related conditions. On the other hand collective agreements benefit workers, as

they usually provide higher pay, bonuses, additional leave and enhanced entitlements (such as

redundancy pay) than an award does.

An award is a ruling handed down by either the Australian Industrial Relations Commission or

by a state industrial relations commission which grants all wage earners in one industry the

same conditions of employment and wages.

Federal awards in Australia have been stripped back in what they are allowed to contain in

order to promote the Enterprise Bargaining Agreement system. Awards in Australia are part of

the system of compulsory arbitration in industrial relations.

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2.1.1 What are enterprise agreements?

Enterprise agreements set out conditions of employment for a group of employees at one or

more workplaces. They differ from contracts because they're governed by workplace relations

law and will override an award. Enterprise agreements are made under the new Fair Work Act

2009. Before the Fair Work Act 2009 (refer to APENDIX B), workplace agreements were

made under the Workplace Relations Act 1996.These agreements included Individual

Transitional Employment Agreements (ITEAs), Australian Workplace Agreements (AWAs)

and collective agreements. ITEAs and AWAs were a type of agreement that was made between

an employer and an employee and lodged with a government agency. ITEAs and AWAs can no

longer be made or lodged. ITEAs and AWAs that have been validly lodged continue to operate

until terminated or replaced. For more on Awards and Agreements please refer to APENDIX C

2.1.2 Rights & rules for making enterprise agreements,

All enterprise agreements must be lodged with Fair Work Australia and are subject to the no-

disadvantage test (NDT) (please refer to APPENDIX D) until 31 December 2009. From 1

January 2010, all enterprise agreements are subject to the better off overall test (BOOT) (please

refer to APPENDIX D). Enterprise agreements must comply with the Australian Fair Pay and

Conditions Standard until 31 December 2009. From 1 January 2010, all enterprise agreements

need to comply with the National Employment Standards (NES).

R Employer must give the employee who'll be covered by the agreement notice of their

right to appoint a bargaining representative to help them negotiate their agreement

within 14 days the agreement-making process started.

R Employers must then give another 21 days after providing the last of the above notices

before holding a vote to decide whether the agreement is or is not approved.

R Employers must ensure that the employees who are to be covered by the agreement are

given a copy or access to the agreement and any other incorporated material for the 7-

day period before voting starts.

R Employer must also notify their employees who are to be covered by the agreement,

by the start of the access period, of voting details, ie. time, place and method.

R Employer must take all reasonable steps to ensure that the terms of the agreement, and

the effect of those terms, are explained to employees.

It's against the law to force an employee to approve, vary or terminate an enterprise agreement,

The FWO will investigate any allegations of illegitimate pressure applied to an employee.

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2.1.3 Using awards, contracts and legislation to calculate pay

Information specific to each employee must be collated and entered into their payroll file. This

includes:

R The industrial award, contract, enterprise/workplace agreement or certified agreement

under which they are employed which outlines their annual pay rate and conditions of

employment, including salary packaging benefits, sick leave entitlements etc.

R Superannuation payments including the superannuation guarantee and voluntary

contributions

R Deductions such as child support, HECS fees.

R Ensure your team has the appropriate data and latest information for calculating gross

pays and annual salaries, for example PAYG Withholding Tax Tables.

2.1.4 Understanding the award or contract

Payroll Manger needs to be aware of the employment conditions for all employees. For

example are they employed under: a federal or state industrial award, for example, the Printing

Industry Award, the Clerks (Commercial, Social and Professional) Award. Some organisations

may have a range of awards their employees are employed under a certified agreement

arranged between a union and an employer, a workplace agreement arranged between an

employer and an individual under the Workplace Relations Act 1996, an oral or written

contract between an employer and an employee. Payroll Manger is responsible to have up-to-

date information on file, for example the most current award or contract, have read it and

understood what employees are entitled to. What is the stated pay rate? Is there a leave loading

on annual leave? Is commission subject upon achieving a sales target?

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2.2 Types of documentation/forms/legislation required to process and

maintain employee payroll information

Payroll Manger must ensure that all employees have completed

R A tax declaration form that requires personal details and information about the types of

deductions to be made, for example HECS fees, and ensure the organisation's copy is filed

appropriately.

R A withholding declaration to claim items such as a dependent spouse rebate or family tax

benefit.

Be aware of all the deductions that relate to each employee and check that they have been

correctly entered into the employee's payroll file and that the associated documentation has

been completed correctly and filed appropriately.

2.2.1 Types of deduction to be aware of when processing payroll data

Statutory deductions - include Medicare levy, PAYG Withholding and Higher Education

Contribution Scheme (HECS))

Voluntary deductions - those deductions an employee chooses to have deducted from their

salary. Examples include health insurance premiums, life insurance premiums and union fees).

The calculation of each deduction will depend on the procedures relevant to each deduction;

for example, PAYG Withholding is determined by the amount earned. It is important when

completing each deduction that the appropriate government and employee documentation is

used, for example:

PAYG Withholding requires the completion of the Tax File Number Declaration by the

employee and the Withholding Declaration by the employer. Health funds have standard

deduction forms the employee is required to complete and sign before a deduction can be

requested from an employer.

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2.3 Leave Entitlements, Allowances, Statutory and Voluntary deductions for

a permanent Administrative/Clerical worker (any level)

Clerks' (South Australia) Award

This is a consolidated award of the industrial relations commission of South Australia

published pursuant to the provisions of the fair work act 1994

Maximum ordinary hours

The maximum number of ordinary working hours of employees other than part-time

employees will be an average of 38 hours per week to be worked on one of the following basis:

R 38 hours within a work cycle not exceeding seven consecutive days; or

R 76 hours within a work cycle not exceeding 14 consecutive days; or

R 114 hours within a work cycle not exceeding 21 consecutive days; or

R 152 hours within a work cycle not exceeding 28 consecutive days.

Leave of absence and public holidays

Annual leave

An employee (other than a casual employee) is entitled to 4 weeks annual leave for each

completed year of continuous service. Payment must not be made or accepted in lieu of taking

annual leave, except in the case of termination of employment. The annual leave prescribed by

this clause is exclusive of the public holidays named in this Award that fall on a Monday to

Friday inclusive. If any such holiday falls within an employee's period of annual leave, the

period of leave will be increased by one day for each holiday. Accrual of annual leave

entitlement 152 hours per annum for each completed year of continuous service:

Payment for annual leave Prior to proceeding on annual leave, an employee is entitled to be

paid for the period of leave at the ordinary rate of pay applicable to the employee. Upon

termination of employment, an employee must be paid for leave accrued which has not been

taken. (Upon termination of employment, if the period of service in any year (including the

first 12 months) is not exactly divisible into complete years, a full-time employee accrues 12

2/3 hours annual leave for each completed month of service in the incomplete year. A part-time

employee accrues such annual leave on a pro rata basis).

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Annual leave loading

An employee is also entitled to payment of a loading equivalent to 17.5% of leave at the

ordinary rate of pay applicable to the employee at the time that payment is made.

Personal leave – injury and sickness

Permanent employee who has a personal leave credit Is entitled to take personal leave if the

employee is too sick to work; or Who is on annual leave, is entitled to take personal leave if

the person is too sick to work for a period of at least 3 consecutive days. Personal leave so

taken does not count as annual leave.

Accrual of personal leave entitlement

An employee's entitlement to personal leave accrues as follows:

For the first year of continuous service - at the rate of 1.46 hours for each completed 38

ordinary hours of work to a maximum of 76 hours.

For each later year of continuous service, at the beginning of each year:

R A full-time employee accrues 76 hours.

R A part-time employee accrues pro rata hours in accordance with the following formula:

76/38 average weekly ordinary hours over the previous 12 months

Bereavement leave

Permanent employee, on the death of a spouse parent parent-in-law sister or brother child or

stepchild household member, is entitled, on reasonable notice, to leave up to and including the

day of the funeral of the relative. This leave is without loss of pay for a period not exceeding

the number of hours worked by the employee in 2 ordinary days work per occasion. Proof of

death must be provided by the employee to the satisfaction of the employer, if requested.

Parental leave

An entitlement to parental leave is subject to the employee having at least 12 months of

continuous service with the employer immediately preceding in the case of maternity leave, the

expected date of birth or otherwise the date on which the leave is due to commence.

An employee who becomes pregnant is, on production of the required medical certificate,

entitled to up to 52 weeks of maternity leave.

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A male employee is, on production of the required medical certificate, entitled to one or two

periods of paternity leave, the total of which must not exceed 52 weeks, as follows:

R An unbroken period of up to one week at the time of the birth of the child.

R A further unbroken period of up to 51 weeks in order to be the primary care-giver of the

child - extended paternity leave.

Personal leave to care for a family member

Permanent employee with responsibilities in relation to a member of the employee’s family

who need the employee’s care and support due to personal injury or for the purposes of caring

for a family member who is sick and requires the employee’s care and support or who requires

care due to an unexpected emergency, is entitled to up to 10 days or 76 hours in any completed

year of continuous service to provide care and support for such persons when they are ill.

Public holidays

Public holidays will be allowed to full-time and part-time employees without loss of pay.

Public holidays are the days (or subsequent days) on which the following holidays are

observed: New Years Day, Australia Day, Good Friday, the Day after Good Friday, Easter

Monday, Anzac Day, Adelaide Cup Day, Queens Birthday, Labour Day, Christmas Day,

Proclamation Day, or any other day which by proclamation may be declared a public holiday

or may be substituted for any such holidays.

Trade union training leave

Permanent employees will be allowed leave without loss of pay to attend training courses

conducted or sponsored by their Union.

ALLOWANCE

Meal Allowances

Any employee who on any day is required to remain at work or to return to work after the usual

finishing time will, when that additional work necessitates taking a meal away from the

employee’s place of residence, be supplied with a suitable meal by the employee’s employer or

be paid a meal allowance of $14.35.

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Vehicle allowance

When an employee is required by an employer to use the employee’s own motor vehicle in the

performance of the employee’s duties, the employee must be reimbursed the vehicle allowance

of 74 cents per kilometre travelled.

Statutory deductions - Medicare levy, PAYG Withholding and Higher Education

Contribution Scheme HECS.

Voluntary deductions -health insurance premiums, life insurance premiums and union fees

voluntary superannuation contributions.

2.4 Timelines for payroll data to be provided to the payroll officer/process for

calculation and processing

It is essential that payroll data is provided for processing within designated timelines to ensure

that:

R All employees are paid in full, with entitlements to leave, allowances and so on

R All deductions are distributed to appropriate authorities to meet timelines that may be

imposed by those authorities

R Timelines imposed by other statutory authorities are met, for example, ato and

superannuation guarantee

R Key dates for business activity statement (bas) lodgement and end-of-financial-year

processes are met.

The timeframe within which the payroll is prepared and authorised must be adhered to, as not

only is it a legal obligation for employers to pay their employees on time, some awards contain

a penalty clause for late payment.

Payroll officer should be aware of the financial calendar that includes:

R Pay dates

R When payment summaries need to be prepared at the end of the financial year

R When each employee has taken sick or annual leave

R The time period before an employee leaves the organisation after resigning to ensure

that their pay is finalised and includes all necessary entitlements

R The ATO submission dates for various taxes to be paid.

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Manager of payroll services, has a key responsibility so as to ensure that the payroll data is

prepared correctly and double-checked for accuracy before payment is authorised, in

accordance with the organisation's policies and procedures and within designated timelines.

Procedures should enable payroll processors and others involved in handling the payroll to

carry out their role and tasks efficiently and know whom to contact if they notice any

discrepancies or have any queries

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3 AUTHORISATION AND MAINTENANCE OF PAYROLL PAYMENTS

3.1 Payroll procedures to ensure that an employee's net wages/salary is

correctly calculated

The authorisation of payroll is an essential internal control requirement, minimising the risk of

inaccurate payroll data being processed and confirming that payment is in line with actual work

performed. All payroll transactions should be validated, verified and authorised by the

appropriate person

Payroll officer/processor prior the payment needs to ensure that:

R the hourly rate is correct,

R the hours worked are correct

R changes in pay rates are approved

R attendance sheets approved and checked

R overtime, changes in shifts are approved

R authorisation of overtime, casual pay, annual leave, sick leave , long service leave,

bonuses

R employees’ files should be independent of payroll files

R signed payroll deduction authorisation forms exist

R employees’ must sign to collect pay

R employees’ names should be regularly and spot checked with personnel records

R all payroll transactions are authorised and approved by the appropriate authority, for

example, the payroll manager

R information used to calculate payroll payments and deductions is up to date and correct

R industrial awards, contracts and government legislation to calculate gross pay and

annual salaries

R the correct superannuation contributions (compulsory and voluntary) have been made

R the correct tax has been deducted (compare the deduction against earnings).

R Employees’ files should be independent of payroll files

R Signed payroll deduction authorisation forms should exist

R Authorisation of overtime, casual pay, annual leave, sick leave , long service leave,

bonuses

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Payroll Manager must supply payroll officer with accurate and up-to-date information.

This includes:

R all relevant information relating to new employees, such as completed tax declaration

form, pay rate, deductions

R any changes to the information already supplied from existing employees, an example

an employee wishes to increase their personal superannuation contribution

R information that affects employees' pay including sick leave, overtime payments,

bonuses, resignations etc.

Payroll Manager must also ensure that all letters, forms and other documentation that notify a

change to be made to an employee's next pay run, is passed on to the appropriate person. This

includes information relating to items such as the payment of a higher duties allowance,

bonuses, a pay increase, commissions, resignations and date of last day at work.

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3.2 Company's payroll procedures reconciliation for accuracy

Process of reconciling wages, salaries and deductions

It is important that payroll data is reconciled on a regular basis to ensure accuracy of wages,

and accuracy of deductions made to statutory and voluntary authorities and to detect errors or

omissions made. If all procedures have been handled correctly, totals should balance.

By comparing amounts paid with what should have been paid at the end of the pay period,

reconciling the totals of gross salary, tax deducted, net salaries, superannuation etc. with what

has been paid to the ATO and to employees. Automated payroll systems have their own

reconciliation checks that are performed each time a pay run is processed. Wages and

deductions can be reconciled on a monthly basis that happens at a general ledger level. It

includes checking what has been paid through the bank with the costing of the general

ledger. Employee earnings and deductions records are reconciled with Payment Summary.

Many of the errors that might occur are generally human ones, that is an incorrect amount is

entered into the payroll file. Be aware of the types of errors that may occur and their

consequences.

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3.3 Policies and Procedures Company may use to deal with payroll enquiries

Dealing with enquiries

Enquiries can be made in person, by email, fax, telephone or mail and can come from current

or ex-employees or from outside parties such as an employee’s superannuation or health fund.

No matter what the source and nature of the enquiry, payroll officer needs to:

R maintain a professional and confidential approach at all times

R listen without interrupting until the employee has said everything s/he wants to say

R ask questions to clarify the employee’s problem

R use positive body language

R use a friendly tone

R respect the employee

R apologise where necessary

R promise to rectify the error

R take the time and trouble to explain the misunderstanding

R be understanding

R have a clear understanding of the level of authority

R respond in an informed and positive manner

R comply with privacy legislation

R know when to forward an enquiry.

R documenting all enquiries in a records book

R make an appointment with the person making the enquiry (if necessary)

Knowing where to find information is a key component in being able to respond to enquiries.

The first source of information should always be the organisation’s policies and procedures.

Establishing a system for dealing with all enquiries, whether they are from employees, the

finance department, management or external agencies, will ensure that they are dealt with

appropriately and promptly and any dissatisfaction or disputes are settled within an appropriate

time with the minimum of fuss, especially as many of the queries may have legal implications.

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The type of queries that can be handled by the payroll officer receiving the enquiry may

include.

R Personal payroll information such as 'How much annual leave do I have left?’

R Procedures such as 'I want to increase my superannuation contribution. What do I do?’

R Dispute such as ‘why isn't my travel allowance included in this pay?'

It is worthwhile holding regular training/information sessions on topics such as organisation's

policies and procedures for overtime, salary sacrificing, claiming allowances, granting a pay

rise etc. The more knowledge payroll officers have, the better able they will be to respond

quickly and appropriately.

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4 MANAGEMENT OF PAYROLL RECORDS

4.1 Declaration forms necessary to satisfy the ATO's requirements for new and

existing employees.

There are two types of declaration forms that may need to be completed by an employee:

Tax File Number (TFN) Declaration

A TFN Declaration requests an employee to state their TFN and whether they wish to claim the

tax-free threshold. Employees who do not have a TFN, or do not know it, need to obtain an

application form for a TFN from the ATO and complete and lodge it immediately. An

employee who does not supply their TFN will be taxed at the highest marginal rate of 48.5 per

cent.

New employees or employees who have not worked for the organisation for 12 months since

making their declarations are required to complete a new TFN Declaration. TFN Declaration

forms are available from the ATO or newsagents, or can be downloaded from the ATO

website.

Withholding Declaration

Employees must provide their employer with a Withholding Declaration if they want to claim

entitlement or make changes relating to:

R The family tax benefit

R Dependant spouse, zone or special tax offset

R The tax-free threshold

R Their residency status

R Their accumulated HECS debt.

Both TFN Declaration and Withholding Declaration forms for new and existing staff have to

be processed according to ATO requirements. Preparing and maintaining salary records is a

key responsibility of the payroll manager who must ensure that all records are up to date,

comply with legal requirements, check that all payroll staff understand and apply the

regulations covering salary documentation.

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From time to time circumstances change for employees, and they must complete either another

tax declaration form or a Withholding declaration to ensure the ATO and their employer have

their correct personal details.

Changes relate to:

R A name change

R A change in employment status, e.g. From part-time to full-time

R Ensure that the a Payroll is checked and authorise payment in accordance with

organisational policies and procedures

R The finalisation of HECS fees

R Claims for dependants

R Change in residency status, e.g. A non-resident becomes a resident.

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4.2 Types of payroll liabilities due to Government and private creditors, how

regularly they should be paid and the necessary documentation

4.2.1 Payment requirements

All payments to authorities required to meet payroll obligations are to be made in accordance

with relevant legislation and your organisation's policy and procedures, including:

4.2.2 Australian Taxation Office legislation

R Employers are required to make payments for

R Fringe Benefits Tax,

R PAYG Withholding,

R HECS and

R Medicare Levy Define all of this

4.2.3 Superannuation guarantee legislation Employers are required to pay contributions to a complying superannuation fund on behalf of

each employee. The obligations under superannuation guarantee legislation are based on each

financial year and must be remitted to the relevant superannuation fund. Some organisations

choose to pay their superannuation levy to the appropriate superannuation fund once a year, in

which case this is due on 28 July, while others pay after each pay run, which may be

fortnightly, monthly or quarterly. The minimum rate is 9% of gross salary.

4.2.4 Accident compensation legislation

Each state has its own accident compensation legislation although it may have a different name

and a relevant authority that administers the requirements of the Act, for example in South

Australia it is known as WorkCoverSA

Calculations to these authorities are based on an employer’s payroll, industry classification and

claims history. Instalments are payable monthly, quarterly, annually or in advance.

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4.2.5 PAYG Withholding - must be paid on 21st of the month following the pay run

PAYG Withholding is the new name for Group Tax. Withholding means the process by which

an organisation deducts amounts to others and sends those amounts to the ATO. The PAYG

legislation classifies withholders as large, medium and small. The ATO determines how and

when withholding payments are to be made according to these classifications; for example, an

organisation classified as a large withholder is required to:

pay an amount deducted in any period commencing Saturday and ending Tuesday on the

Monday following the period

pay an amount in any period commencing Wednesday and ending Friday on the Thursday

following the period

pay the total amount of their PAYG Withholding liability electronically (to pay electronically,

organisations can use direct credit, direct debit or BPAY®) to the ATO on or before the due

date for notification and payment.

4.2.6 Accident compensation legislation

All calculations must be checked for accuracy, currency and compliance with the relevant

legislation and regulations.

The way you distribute payroll deductions will be determined by the agency to whom you are

making the payment; for example, PAYG Withholding must be paid electronically by using

either:

Direct credit

Direct debit

Bpay®.

It is important that systems are established to meet any statutory obligations; for example,

taxation legislation has a number of obligations in relation to record keeping when payments

are made to employees.

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Examples include:

R Pay as you go PAYG-Employers must obtain Tax File Number Declaration Forms

from all their employees.

R Superannuation contribution- Employers must make sufficient superannuation

contributions to a complying superannuation fund or retirement savings account for

most employees, including full-time, part-time and casual staff.

R Fringe Benefit TAX - Employers need to keep records that show the taxable value of

each fringe benefit provided to each employee.

Group tax is the PAYG Withholding tax that every employee who earns over $6,000 a year

(the tax-free threshold) must pay. Payroll officers ensure that the correct amount of PAYG tax

has been deducted from each individual's gross pay, then, using the organisation's payroll

register, calculate the total PAYG tax that the employer is liable to pay. This total is then

transcribed onto a Business Activity Statement form and, together with payment, is sent to the

ATO by the 21 s' of the following month.

Payroll Manager should ensure that:

R procedures are in place for double-checking both the individual's tax deduction and the

employer's total for accuracy

R any discrepancies are noted, the appropriate person is advised promptly and any errors

rectified

R An important task for employers is to prepare payment for their employees and

complete the related documentation for the ATO. Your role may be to oversee that the

correct procedures are followed and obligations are met within designated timelines.

R copies of the form are kept for the organisation's records

R processes allow for completion by the due date.

From time to time tax rates change. These changes are publicised on the ATO's website and in

the PAYG Withholding Tax Tables available from the ATO and newsagents. If your

organisation uses a computerised package, the software company will provide a disk with the

current version of the tax rate.

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4.3 End of Payroll Year procedures in relation to providing PAYG Payment

Summaries to employees and to the ATO

Preparing employee payment summaries

An important task for employers is the prepare payment summaries (previously known as

group certificate) for their employees and complete the related documentation for the ATO.

Your role may be to oversee that the correct procedures are followed and obligations are met

within designated timelines.

Procedures may include:

R Totalling the gross salary and tax paid by each individual during the financial year

period

R Reconciling the total amount of tax paid by the organisation with the cheque butts

which detail the tax paid to the ATO during the financial year period

R Identifying and resolving any discrepancies

R Preparing a PAYG summary statement showing the correct amount of tax paid for the

financial year by the organisation.

R Including a copy of all payment summaries with the summary statement and sending

them to the ATO.

PAYG payment summaries

PAYG Payment Summaries must be issued to ALL employees who have received salary

payments. This includes income earned from full-time, part-time or casual employment during

the income year. A payment summary must be provided to an employee by an organisation

even if no tax instalments were deducted:

R By 14 July each year

R Within seven days of making an eligible termination payment

R In the event that a terminating employee requests that one be issued

R Upon request in writing from an employee.

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Prior to issuing payment summaries to employees, a reconciliation of the payroll must be

completed to ensure that all data has been entered and calculated correctly.

This verifies the accuracy of payments made to:

R Employees and creditors

R The ATO

R Superannuation funds

R Any other institutions for which employee deductions were made

Two copies of the Employee Payment Summary are to be given to employees. One is their tax

return copy and the other is their personal record copy. Employees must retain payment

summary information for five years.

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5 REFERENCE LIST

www.fairwork.gov.au

www.eric.sa.gov.au

www.safework.sa.gov.au

www.industrialcourt.sa.gov.au

www.ato.gov.au

www.workcover.com

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http://www.eric.sa.gov.au/

http://www.fairwork.gov.au/

6 APPENDICIES

6.1 APPENDIX A

Organisations’ legal obligations under child support legislation.

As an employer of a child support customer you have a number of obligations under child

support legislation.

R You must advise your employee, in writing, how much child support has been deducted

each pay period (e.g. on their pay slip);

R You are required to keep appropriate records of the child support you deduct and remit;

R You are required to respect your employee's privacy - you cannot tell anyone (other

than the employee in question) that you deduct child support from your employee's pay.

CSA will not discuss your employee's personal affairs with you;

It is illegal to discriminate against any employee or potential employee because of their child

support responsibilities. Discrimination includes charging employees a deduction fee for

making child support deductions that are made under a statutory obligation;

R You cannot make a deduction of child support that leaves an employee with a net pay

(after tax instalment deductions and deductions of child support) of less than the PEA

(unless deductions are made under a Section 72A Notice);

R You must make sure you deduct the right amount. CSA will tell you the right amount to

deduct from your employee's pay. You cannot change this even if your employee, their

solicitor or anyone else asks you.

Payments to CSA are due on the seventh day of every month. If you pay late, then the money

will be late getting to the other parent and the children of your employee.

If you do not meet your obligations, the law imposes penalties.

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6.2 APPENDIX B

Making enterprise agreements under the FW Act

If an employer wishes to enter into a new collective agreement they must notify employees of

the right to be represented as soon as practicable and not later than 14 days after the

‘notification time’.

The ‘notification time’ is the time when:

R The employer agrees to bargain, or initiates bargaining, for the agreement;

R A scope order in relation to the agreement comes into operation;

R A low-paid authorisation in relation to the agreement comes into operation; or

R A majority support determination is made.

The notification must take the form of the ‘notice of employee representation rights’ prescribed

in the Fair Work Regulations 2009 and must be given to each employee who will be covered

by the agreement who is employed at the notification time.

Once bargaining is complete and a draft agreement has been made certain steps must be

taken to ensure the agreement is valid.

Employers must ensure that:

R the terms of the agreement, and the effect of those terms, are explained to the

employees; and

R the explanation is provided in an appropriate manner (e.g. appropriate for young

employees or employees from culturally diverse backgrounds).

R Employees must endorse the agreement by voting for it. A vote must not occur until at

least 21 days after the day on which employees were given notice of their

representational rights.

During the 7 day period before voting for the agreement, the employer must ensure employees

are given a copy of:

R the agreement; and

R any other material incorporated by reference in the agreement.

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R Employer’s must also notify employees of:

R the time and place at which the vote will occur

R the voting method that will be used.

Once an enterprise agreement is made, a ‘bargaining representative’ (usually the employer or a

union) for the agreement must apply to FWA for approval of the agreement.

The application must be lodged with Fair Work Australia within 14 days of the agreement

being made.

The application must be accompanied by:

R a signed copy of the agreement; and

R any declarations that are required by the FWA Rules or regulations to accompany the

application.

To approve an enterprise agreement, FWA must be satisfied that:

R the agreement has been made with the genuine agreement of those involved;

R the agreement passes the No-Disadvantage Test (the BOOT test after 1 January 2010);

R the group of employees covered by the agreement was fairly chosen;

R the agreement includes a nominal expiry date (not more than four years after the date of

FWA approval);

R the agreement provides a dispute settlement procedure; and

R the agreement includes a flexibility clause and a consultation clause.

Bargaining representatives

During the bargaining process either side may be represented by a bargaining representative.

The following may be bargaining representatives:

R an employer who would be covered by the agreement;

R any union who has a member that would be covered by the agreement (unless the

member has specified in writing that he or she does not wish to be represented by the

union);

R any union that has applied for a low paid authorisation that relates to the agreement; and

R any person appointed in writing as a bargaining representative by either an employer or

employee who would be covered by the agreement.

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A union that is a bargaining representative for a proposed agreement can apply to FWA to be

‘covered’ by the agreement. A union is automatically a bargaining representative for an

agreement if it has a member in the workplace whose industrial interests it is entitled to

represent, and the member does not appoint another person. A union need not be involved in

bargaining in order to be covered by the agreement. Provided a union is a bargaining

representative and notifies FWA, FWA must order that the union is covered.

Enterprise Bargaining

The process which employers and employees use to negotiate a set of rules and conditions for

their workplace and which results in an enterprise agreement. Other terms to describe

enterprise bargaining include: workplace bargaining, collective bargaining, over award

bargaining and company bargaining.

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6.3 APPENDIX C

Awards and enterprise agreements

Awards

When you accept the job your employer should inform you which award or enterprise

agreement you are working under. This should be included in your letter of offer. See also:

Letter of offer

Awards and enterprise agreements are legal documents. They outline the minimum

entitlements you must receive for working in a particular industry or for doing a certain job.

Some of these entitlements include:

R Hours of employment

R Pay rates

R Penalty rates like overtime

R Casual loadings

R Meal allowances

R Leave entitlements

R Employment protection.

Awards and enterprise agreements also set out your general responsibilities as an employee as

well as the responsibilities of your employer.

Your employer must pay you at least what you are entitled to under the award or agreement

that applies to your job.

If you are employed under a contract your employer must pay you at least the minimum wage

and entitlements as set out in the appropriate award.

Displaying awards in the workplace

Your employers should exhibit a copy of the relevant award in your workplace so you can see

what your wages and entitlements are.

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Adult award rates of pay

The majority of awards and agreements stipulate an age at which all employees must be paid

the full adult rate of pay. Typically, this is 21 years of age but can be younger under some

awards.

Most awards make provision for adult and junior wages. Minimum rates for juniors tend to be

lower than those for adults. They are often differentiated by age group. See also: Junior Rates

of Pay.

Junior rates of pay

Junior rates of pay are based on the age of an employee and are usually set as a percentage of

the adult rate. Junior rates of pay are found in many awards and agreements.

Job classification

Your job classification should be written on your letter of offer. Jobs are classified into

categories which correspond with the amount of training, skill, competencies, knowledge or

experience required to do them. Each job classification has a specific rate of pay related to it

which is set out in awards and agreements. An example of a job classification is: Junior shop

assistant under 16 years of age.

Benefits of an award

You may prefer to work under the conditions of an award because:

R Awards provide minimum conditions of employment and rates of pay that apply across

an industry or occupation

R Awards must contain provisions that set ordinary hours of employment, pay equity

between males and females, redundancy entitlements, sick leave, part-time, casual

employment and grievance and dispute resolution procedures

R The rates of pay and conditions of employment are legally enforceable

R Rates of pay and conditions of employment cannot be reduced by the employer

R Minimum rates of pay are subject to review through national wage case decisions.

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Enterprise agreements

If you are employed under an enterprise agreement your work contract would have been

negotiated voluntarily between your employer and the employees or the union on behalf of the

employees. Enterprise agreements set out the minimum conditions of employment for

employees engaged in particular types of work in one particular enterprise. Agreements may

cover some or all of the employment conditions under the appropriate award.

Enterprise agreements must comply with all workplace laws and, in general, employees should

not be worse off under the agreement compared to awards.

An enterprise agreement:

R Has terms that override any award provisions

R Must comply with all employment laws requiring minimum entitlements to parental,

annual and long service leave

R Must be in writing and signed by, or on behalf of, the parties and the parties to the

agreement must be named

R Must state the employees who will be covered by the agreement

R Must be for a set term of not more than three years but can continue in force beyond

that term until terminated.

Benefits of an enterprise agreement

R Employees may prefer to be covered by an enterprise agreement because:

R it is a collective agreement that can identify and address the particular needs of a

business

R the rates of pay and conditions of employment must not be less than those contained in

an award and can provide greater entitlements

R employees can be represented in negotiation by a union or it can be negotiated by a

nominated committee of employees

R if the conditions of an enterprise agreement are breached an application for remedy of

the breach or recovery of entitlements can be made.

Enterprise bargaining

Enterprise bargaining is the process which employers and employees use to negotiate a set of

rules and conditions for their workplace, which results in an enterprise agreement. Another

term to describe enterprise bargaining is ‘workplace bargaining’.

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Fixed-term contract

A fixed-term contract:

R Is an employment contract with a defined end date

R May be linked to a specific date or completion of a project

R May apply to employees covered by awards or agreements in certain circumstances

R Is more commonly used for employees not covered by awards or agreements, such as

senior management.

Individual contract of employment

An individual contract of employment:

R Would apply where an employee is not covered by other types of employment

contracts, awards or agreements

R Is where most conditions of employment and the rate of pay are negotiated between the

employee and employer

R Is not required to be registered with any industrial court, but if the contract is broken an

application for a breach of contract may be made in the courts under ‘common law’

R Contains some conditions of employment such as annual leave, long service leave and

parental leave, specified by legislation and these minimum entitlements still apply to

the employee

R Cannot provide lesser entitlements than those contained in an award or agreement if the

employee’s employment is covered by an award or agreement but can add to or provide

additional benefits.

Award-free employees/ contracts

Not everyone is covered by an award. Some employees have the terms and conditions of their

contract of employment mutually agreed upon with the employer. However, employment

contracts are still covered by some employment laws which provide minimum entitlements

such as annual and long service leave, occupational health and safety and workers

compensation.

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6.4 APPENDIX D

THE NO DISADVANTAGE TEST & THE BETTER OFF OVERALL TEST

The No Disadvantage Test

The new NDT differs in important respects from both the old No Disadvantage Test which

applied to ‘pre-reform’ agreements and the ‘Fairness Test’ which applied between 2007 and

2008. Every new agreement must be assessed for compliance with the NDT by FWA. The

NDT assesses an employee's terms and conditions of employment under a workplace

agreement against conditions that might otherwise apply to that employee under a relevant

Award or NAPSA.

Enterprise agreements do not commence operation until they are assessed as passing the NDT

and they then come into effect 7 days after approval by FWA.

If FWA determines that an agreement does not pass the NDT then the employer will usually be

given the opportunity to vary and re-submit the agreement. It will not come into effect until it

passes the NDT. If it still fails the NDT after this time the agreement is invalidated and the

employer will be liable to compensate the employee for any shortfall in wages that occurred as

a result.

The Better Off Overall Test

The BOOT will be applied to new enterprise agreements made from 1 January 2010. An

agreement will pass the BOOT if FWA is satisfied that, as at the test time, each award covered

employee (and prospective award covered employee) to be covered by the agreement would be

better off overall if the agreement applied than if the relevant modern award applied. This will

ensure that, over the period of operation of the agreement, employees would be better off

overall than they would be under the modern award over the same period.

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REPORT - Assessment 3 Manage Payroll

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