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BSBFIA302PROCESS PAYROLLPRESENTATION 2

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PRESENTATION OBJECTIVES

At the end of this lesson you will be able to:

• Prepare payroll

• Reconcile wages for the pay period

• Correct irregularities and refer to authorised person as

needed

• Make arrangements for payments

• Seek authorisation for payroll and individual pay advice

• Produce and store payroll records

• Follow security measures for payroll

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PREPARING PAYROLL MAY INCLUDE:• Calculation of gross pay

• Calculation of taxation and other deductions to arrive at net pay

• Preparing cheques / electronic funds transfer

• Preparing pay advice slips

• Seeking authorisation for the payroll file

• Processing payments

• Handling and storing records appropriately

• Maintain time lines always

• Ask your supervisor for help if you need it

• Gain approval for areas you are unsure about

The ATO provides instructions on all areas of taxation for individuals and

business, the Tax file number declaration form allows for many variations and

special circumstances.

You may not need to understand all aspects but do need to be aware of these

areas of payroll. They need to be taken into consideration.

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PREPARE PAYROLL Your organisation will have their own system for calculating payroll for its employees. You

are required to follow legislative requirements. These instructions come from the ATO

weekly tax tables:

Step 1 Calculate your employee’s total weekly earnings – add allowances and any irregular payments

(to be included in this week’s pay) to normal weekly earnings, ignoring any cents.

Step 2 In column 1 of the tax tables, find your employee’s total weekly earnings.

Step 3 Use the appropriate column to find the correct amount to withhold. If your employee is – claiming

the tax-free threshold, use column 2 – not claiming the tax-free threshold, use column 3. Your

employees tax free threshold status will be confirmed when they complete the TFN declaration form

on commencement.

Step 4 If your employee has an end-of-year entitlement to a tax offset, use the Ready reckoner for tax

offsets’ to convert the employee’s estimate of their full-year entitlement into a weekly offset value.

Subtract this value from the withholding amount found in step 3.

Step 5 If your employee is entitled to make an adjustment for the Medicare levy, subtract the value of the

adjustment, determined from the Medicare levy adjustment weekly tax table (NAT 1010) from the

amount found in step 4.

Step 6 If your employee has advised you of an accumulated Higher Education Loan Program (HELP) or

Financial Supplement (FS) debt, add the amount determined from the HELP weekly tax table (NAT

2173) or SFSS weekly tax table (NAT 3306) to the amount you calculated in step 5.

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CALCULATE PAY EXAMPLES:

Calculate pay for hourly workersCalculate pay based on timesheets or other time recording systems. Include number of hours worked each week, plus any loading applicable for working casual hours.

Ordinary time worked Shift loading Laundry allowance

Hours Rate/hour $

30 $21 0 $5

Ordinary hours x rate of pay + allowances = gross weekly pay 30 x $21 = $630 + laundry allowance $5 = $635 gross pay for the week

Tax to be deducted = $65 (from tax tables weekly)

Gross - deductions = net pay $635 – $65 = $565 net

Calculate pay for hourly workersCalculate pay based on timesheets or other time recording systems. Include number of hours worked each week, plus any loading applicable for working casual hours.

Ordinary time worked Shift loading Laundry allowanceHours Rate/hour % $

30 $21 20% $5Shift loading - take rate/hour x shift allowance = new rate/hour $21 x 20% = $25.20*

Rate/ hour (with shift loading*) x hours worked + allowances = Gross pay $25.20 x 30 = $756 $756 + $5 laundry allowance = $761 (gross)

Gross pay – deductions (tax only in this example) = Net pay $761 - $97 (with tax free threshold) = $664

Your staff member is paid for the hours they work as a part time employee. You have checked the timesheet and make calculations as follows:

The same staff is asked to work a shift which attracts an additional charge. The information and calculations are as follows:

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CALCULATE PAYROLL

The general process may have different stages depending on

your organisation and its policy:

• Accumulate all timesheets and salary information for the

upcoming payroll

• Ensure all timesheet hours and dates are accurately computed

• Timesheets must be signed by employees and supervisors

• For salaried employees, ensure all salaries are present in the

system

• Separate data to be paid according to the respective pay dates, if

processing weekly, fortnightly and monthly payrolls

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CALCULATE PAYROLL

Check timesheets for

accuracy

Calculate

• Gross pay,

deductions,

allowances, net pay

Prepare payment

amounts

Prepare pay advice

Gain approval

Make payments

Payroll system

Employee record wage detials including pay rates and deductions

Payroll register

Employee earnings record

Pay advice

Actual payment - eft, cash, cheque

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RECONCILE TOTAL WAGES FOR PAY PERIOD

Reconciliation is an exact science! It is not sort of reconciled. It is correct or not!

Payroll represents a large part of business costs. It needs to be right. There are

several groups of people who care about this:

• The employee –need to be paid properly for their work, in this time of skills

shortages you need to keep the people you have trained, pay them right

• The employer and their financial investors need to know their businesses are

being run properly and effectively – mistakes cost money

• The ATO – noncompliance and mistakes with payroll impact on your PAYG

responsibilities and can result in internal disorder and external fines

• Your workers compensation insurer bases their premium on your total wages, if

you are incorrect you may have issues with your level of cover

• Your accountant – problems in payroll can impact other figures in the business

and cause general problems with budgets and comparison of figures

Always work on getting it right!

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RECONCILE TOTAL WAGES FOR PAY PERIODOnce you have reached the payroll register make sure your calculations are correct.

This is one of the stages of reconciliation. Take the hours and other calculations and cross check.

Example: Do the total hours match the amount paid?

There are several ways to do this:

• Do the hours on the timesheet add up? Will the gross pay be correct?

• Make sure rates of pay, deductions and allowances are correct

• Take leave requests into consideration

• Process deductions to correct accounts - PAYG the correct amount needs to be paid to the ATO

• For each individual compare calculations on timesheets

• Check total payroll against individual amounts before you actually process payments

• Add together total net pays (take all deductions and allowances into consideration) does it balance

with the total gross? If not, find out why before you make the payments

• Reconciliation can be completed for each pay period, monthly or quarterly (if this is when your

business processes its ATO payments via the BAS)

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ARRANGEMENTS FOR PAYMENTHow will you pay your staff? When first employed you should have discussed the

payroll system with them. How your business pays their employees must be

stipulated at this time - cash, cheque or directly deposited into the bank account

and when. Consider:

• Employee detail forms (completed on commencement)provide employees

personal details including bank account details. Do not get this wrong when

you enter details into the employee’s payroll records. Double check!

• Keep records accurately on the employee file including BSB and account

numbers

• Keep written verification of any changes to your employees details

• The majority of businesses will now pay using the direct deposit option,

manage the deposit times so wages are available for your employees on time

• Other payment options are available cash, cheque, see your eBook for more

information

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ARRANGEMENTS FOR PAYROLL

Further general guidelines followed in payroll preparation:

• Look for any changes submitted by the employee on a time sheet

or through other personnel advice

• Consult with a supervisor or other person about any noticeable

errors or questions on pay advices or timesheets

• If using a software payroll system test the system before creating a

payroll run

• Software can malfunction you must have a manual backup

• Do random checks of different areas of the software to ensure that

it's functional

• If your payroll system is manual, ensure all paperwork is organised

and within reach during the payroll run

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PAYROLL AUTHORISATION AND INDIVIDUAL PAY ADVICE

In your organisation there will be a person/s you need to report to.

This is the person to confirm your work or queries with. Your

organisation will stipulate the conditions of your role. You must

adhere to these conditions.

Present payroll files to your supervisor or other authorised person to:

• Approve information provided

• Provide information to confirm the total value of payroll for that

period

Who do you need to gain approval from?

• Your manager• Personnel with authority to approve

payroll decisions

Why do you need approval?

• Control measure to minimise the chance of inaccurate data being processed

• Confirmation of all calculations• Others need to know the value of

the payroll for monitoring of spending

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PRODUCE, CHECK AND STORE PAYROLL RECORDS SECURELY

There are many payroll records organisations produce from their

software system or create manually to suit their business. Payroll

records may include:

• Cash analysis sheets

• Electronic funds transfer

• Employee summary report

• Pay advice slips

• End of month reports

• End of year reports

• Payment summary

• Taxation reports

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PRODUCE, CHECK AND STORE PAYROLL RECORDS SECURELY

• Under taxation law, a person carrying on a business must keep

files that record and explain all transactions

• These records include all documents relevant for the purpose of

ascertaining your income and expenditure

• The records must be kept and be readily accessible

• Any books of accounts, records or documents relating to the

preparation of your income tax return must be retained for the

required period of time

• Other statutory provisions, such as company law, require a

company to retain records for seven years after the completion of

the transaction

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SECURITY PROCEDURES FOR PROCESSING AND MAINTAINING PAYROLL RECORDS

Payroll records can be designed to your specifications, e.g. weekly, fortnightly or

monthly and include customised payslips, administration of PAYG, superannuation,

statutory sick pay, annual leave, tax rates, overtime loading, allowances, etc. These

are all examples of records that require safe storing.

Time and wages records

• Every employer is required to keep a time and wages book, or similar record

(timesheets) and have this available for inspection by an industrial inspector

during hours of operation

• Store the following securely:

• Backup all information regularly

• Bundle all documents and electronic files together for ease of access

Information service for newly established and existing businesses

• Fair Work Australia helps employers and employees meet their obligations under

awards, agreements and legislation covering wages and employment conditions

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SECURITY PROCEDURES FOR PROCESSING AND MAINTAINING PAYROLL RECORDS

Follow the security procedures for processing payroll and for maintaining payroll records

according to the rules and policies of your organisation.

Examples provided can include but are not limited to:

• End of month reports

• End of year reports

• Taxation reports

As a part of end of year reporting you would need to:

• Ensure your payroll records reconcile with your general ledger in your accounting

system

• Make sure that the PAYG tax records are the same as the tax paid to the ATO

• Ensure all employee records are correct and TFN are valid

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SECURITY PROCEDURES FOR PROCESSING AND MAINTAINING PAYROLL RECORDS

• Security procedures can involve password protected files with levels

of organisational authority taken into consideration

• Records that are no longer required are to be disposed of securely

Privacy is a primary concern with your employee’s personal details:

• Changes to employee files must be done with written permission and

records kept

• Third party (external party) requests for information approved by the

employee in writing

• Who should have access to this information? • Only authorised personnel e.g payroll officers, payroll

supervisors, others authorised to make decisions regarding

changes to payroll

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SECURITY PROCEDURES FOR PROCESSING AND MAINTAINING PAYROLL RECORDS

ATO employee related records

• Payroll tax when payroll reaches a certain figure

• Keep records of remitted amounts under PAYG withholding

accounts

• All employers who provide fringe benefits to their employees must

register for FBT and keep records according to statutory

requirements

• At the end of the financial year employers are required to provide

their employees with a Payment Summary - previously called a

group certificate

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PAYMENT SUMMARIESUnder Pay As You Go (PAYG) withholding requirements you must give each of your

employees a payment summary showing:

• Payments made to them

• Amounts withheld from those payments during the past financial year

The payment summary provides information to the ATO such as:

• Gross salary wages

• Allowances

• Lump sum payments

• Union fees

Provide payment summaries to all your employees even if you were not required to

withhold any tax.

Payment summaries are due in July after the end of the financial year to help employees

manage their own taxation affairs.

Reports are due to the ATO in August.

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PRESENTATION SUMMARY

Now that you have completed this presentation you should be able

to:

• Prepare payroll

• Reconcile wages for the pay period

• Correct irregularities and refer to authorised person as needed

• Make arrangements for payments

• Seek authorisation for payroll and individual pay advice

• Produce and store payroll records

• Follow security measures for payroll