The Access Group said businesses face increasing challenges to ensure accurate, compliant and timely pay runs for every pay cycle.
With 13 million people employed by 2.4 million businesses in Australia, millions of pay runs are processed by staff every week, fortnight, and month.
To cope with the challenge, payroll teams must successfully manage interconnected dependencies that are rarely seen and generally not appreciated by the broader business.
“From ensuring compliance, satisfying pay conditions and maintaining security, to integrating multiple interconnected systems and managing various business structures, each payroll department will face their own unique challenges,” said the president of the Access Group, Kerry Agiasotis.
“Every business is unique, so it’s worthwhile to review and analyse if your payroll software enables you to effectively manage these dependencies and achieve an accurate, compliant, and timely pay run each and every pay cycle, regardless of your unique business conditions and structure.”
Mr Agiasotis said it was important to deliver a rich employee experience during the payroll process.
“Are your employees still filling paper forms and emailing leave requests or personal detail updates that payroll staff must manually input into your payroll system? Is your business still printing out and delivering payslips by hand to each employee?” he said.
“These processes are not only error prone and time-consuming, but also serve to hamper the flexible working environment increasingly demanded by employees.”
Research by the Access Group revealed that over half of Australian organisations (54 per cent) said it is now more important that employees are given choices about when and where they work.
A similar number (51 per cent) said that they should have influence over the resources needed to do their job.
Mr Agiasotis said to effectively retain, foster and recruit great talent, businesses needed to provide an environment that supported this way of working.
“Critical to creating this environment is to provide employees with secure and easy-to-use self-service options so they can manage their timesheets, request leave, and view payslips from anywhere, at any time,” he said.
“These tools can help both payroll teams and employees foster an environment of flexible working, and avoid the manual, time-consuming work often required by legacy payroll solutions.”
This would also be important to manage a flexible business structure during payroll processing.
With the need to cater for various pay conditions, nuances within award conditions, enterprise agreements or even external contractors, payroll managers would face a real challenge to ensure they delivered an accurate and compliant pay run each pay cycle.
“If we consider that 60 per cent of the 2.4 million Australian businesses are likely multi-entity in structure (a business consisting of several ABN entities), the payroll challenge is compounded by each ABN entity,” the Access Group said.
“When it comes to processing payroll, these businesses and their payroll teams must report accurate and compliant payments to the ATO from each of their separate entities.
“Multi-entity structures therefore introduce a complex dimension to the payroll process, which many payroll software solutions just weren’t built for.”
Effectively processing payroll would also require proceeding through a series of inputs, throughputs, and outputs.
This included the input of data from third-party productivity applications, which impact payroll calculations, the throughputs of processing and managing pay runs and generating outputs like EFT and single touch payroll and financial reporting.
Mr Agiasotis said the challenge for many payroll teams, however, was the lack of integration of their payroll software with third-party systems, like time and attendance, business intelligence, HR, or workforce applications.
“This means that data between their payroll software and applications aren’t seamless, resulting in duplicate data and errors due to unnecessary manual keying,” he said.
“These payroll teams also often experience difficulty with payroll reporting, as their payroll software can’t handle a complex general ledger structure. For example, they are unable to break down payroll by detail or complex cost categories.”
Navigating the ever-evolving payroll regulatory landscape is also one of the most significant challenges facing payroll teams across Australia and New Zealand.
An Australian Payroll Association survey confirmed that many payroll managers believe Australian employee legislation is complex and difficult to interpret.
“With new regulatory requirements introduced every year, ranging from those mandated by Annual Salary Agreements, superannuation changes, and in 2022, Single Touch Payroll Phase 2, staying on top of your compliance requirements isn’t getting any easier,” Mr Agiasotis said.
“In many cases, non-compliance can result in devastating results for a business – from significant fines, reputational damage, decreased employee morale, and in some states, even criminal penalties for individuals.”
Mr Agiasotis said in a time of uncertainty brought about by the COVID-19 pandemic, one of the key concerns for many payroll teams is how they would maintain a smooth payroll operation when the unforeseen happens.
He said the biggest cost in an organisation is employees, so it would be critical for businesses to be in control of this resource.
“When a business starts growing, its payroll solution may not be able to provide the visibility the business’ leadership needs to not only track and control payroll costs, but also manage the employee lifecycle, from hire to retire, for a diverse range of conditions,” Mr Agiasotis said.
“All too often legacy systems fail to provide a full and detailed history for compliance and audit trails, including visibility of changes to positions and salaries.
“They are also unable to capture all historical changes to the awards and pay conditions of each employee, which means the business isn’t able to manage legacy pay conditions of employees.”
Accountants and businesses can take The Access Group’s quick two-minute payroll software quiz to find out if your business is equipped to overcome the Payroll Challenge.