Payroll essentials and what you need to know

Payroll, while an essential part of your business, is also one that is commonly undervalued, especially for smaller businesses where dedicated payroll software may not be used.

We’ve come up with a list of payroll essentials to ensure that your payroll is hitting the target month after month.

1. Inaccuracy in your payroll system

One of the more commonly seen payroll errors goes back to data input when adding in an employee. If any part of this process is done incorrectly it could result in incorrect payments being made and unhappy employees. For example, an incorrect tax code or tax rate means that your employees could be paying more tax than necessary, which can be a headache for you to sort.

You also need to ensure you have accurately accounted for, and paid, the hours worked by each employee. Similarly, your payroll information needs to be kept up to date with any local laws or tax law changes, otherwise your payments can be incorrect.

Triple check this data and get it right to ensure less payroll drama, or employ the services of a chartered accountant to guarantee your business’ payroll responsibilities are delivered on time, every time.

2. Security

All payroll information needs to be kept confidential and secure. Any personal information on your employees, including names, IRD numbers, address details, and wage / salary information, needs to be covered.

Many payroll packages allow for encryption software, meaning the information is scrambled unless you have the correct key to allow you to read it. If you don’t use encryption software then making sure passwords and file protections are used is crucial.

3. Overtime

It isn’t uncommon for businesses to pay overtime rates to their employees. Your payroll software can be programmed to allow for an increased rate for an employee’s weekly or monthly hours over a specified number. This means goodbye to potential miscalculations of overtime.

4. Record keeping

Payroll records, from sole traders through to large multinational organisations, are required to be kept for a minimum of at least six years.

Auditors look at this information and, therefore, it’s important to show what happened and when. Supporting information is particularly important to help provide quick and accurate answers when any payroll errors have been made or there are other discrepancies. Well-kept records is a must for any successful business and failure to keep payroll records can see you fined.

5. Failure to make payroll deadlines

Processing payroll can be a big time commitment. Like many office administration tasks, payroll can seem like it will take no time at all but before you know it, it’s taken hours.

Ensuring you have all employee information prior to payroll (IRD number, tax code/rate through to name, address and bank account), and correctly capturing the hours that your employees have worked, means an easier ride when it’s payroll processing time.

There are many ways that a poorly functioning payroll system is costly for your business – from overpayments to employees through to time commitments. Outsourcing your payroll could give you the ability to focus your time on other areas in your business that need attention.

If you’d like to discuss outsourcing your payroll, or payroll systems and processes, then get in touch with us. We can create a system to work alongside what you have already, or suggest ways of taking the headache out of a poorly functioning system. Give us a call.

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