Businesses today are expected to understand and remain up-to-date on a wide range of Employment and Labour regulations that govern their activities.
These include, but aren’t limited to, labour laws, national tax, regional variation, industry-specific rules, as well as employment instruments, amongst other things. Whilst these may appear unrelated at first glance, they all impact your payroll responsibilities.
Labour laws specifically govern how you pay your employees, your taxes and how you report on this information. Ensuring you remain payroll compliant as a business is of the utmost importance.
In point of fact, employers who do not stay on top of their payroll obligations are at risk of financial penalties, interest fees, lawsuits, or even losing your business altogether.
Whilst the risk of getting your payroll wrong might feel scary and overwhelming, getting a better understanding of the ins and outs of your responsibilities should help. This is especially true when dealing with foreign payroll and laws. So let’s start with the basics…
What is payroll compliance?
Payroll compliance is adhering to all federal, state and local regulations that govern how employees are paid.
It covers everything from hiring & ending employment, salary & leave entitlements, bonuses, and more. It also directly links to payroll tax and accounting, meaning there is legislation to be considered.
Employers that violate any of these laws may face penalties that could negatively affect their bottom line or put them out of business.
Learning how to navigate payroll compliance can help you avoid tax trouble and maintain positive workforce morale.
Why is payroll compliance important?
I’m sure you’ve seen staff underpayment at the forefront of the Australian media with a long list of underpaid employees.
There can be heavy penalties for wage theft that can lead to reputation damage, significant fines and potential jail time. In addition, the Fair Work Ombudsman (FWO) can inflict its own penalties.
Sometimes it’s as simple as a slightly off system configuration that could lead your business to a serious breach. These breaches can go unnoticed for years and, when found, can make or break your business.
With the tightening of Australian legislation and the public tolerance wearing thin, no organisation or industry is safe from a payroll compliance crackdown.
Payroll compliance is complex and time-consuming but we’ve outlined the following requirements to make it easier for you.
The pillars of payroll compliance
National employment standards
The 11 minimum entitlements of the NES are:
- Maximum weekly hours
- Requests for flexible working arrangements
- Offers and requests to convert from casual to permanent employment
- Parental leave and related entitlements
- Annual leave
- Personal/carer’s leave, compassionate leave and unpaid family and domestic violence leave
- Community service leave
- Long service leave
- Public holidays
- Notice of termination and redundancy pay
- Fair Work Information Statement and Casual Employment Information Statement
The national minimum wage and NES make up the minimum entitlements for employees in Australia.
A Modern Award is a document that sets out the minimum terms and conditions of employment on top of NES. That came into effect on the 1st of January 2010.
Modern awards provide the following entitlement:
- Hours of work
- Penalty rates
Modern awards apply to all employees and employers that are covered by the national workplace relation system.
Most business owners don’t realise that you have to keep a payroll record for all of your employees for seven years.
If your business is subjected to an audit, records must be readily available to the Fair Work Inspector. They must be legible and in english. These records include payslips, employee agreements, rosters and timesheets.
Records can’t be changed unless the change is to fix an error and can not be misleading or false information.
As an employer, you have five main record-keeping obligations:
- Records for payments made to employees
- Records for super contributions for employees
- Records for super fund choice for your employees
- Records for pay as you go withholding (PAYGW)
- Records for fringe benefits provided
Single touch payroll
Single Touch Payroll (STP), is an Australian Government initiative to reduce employers’ reporting burdens to government agencies.
With STP, employers report employees’ payroll information to the ATO each time employers pay employees through STP-enabled software. Payroll information includes:
- salaries and wages
- pay as you go (PAYG) withholding
STP started on 1 July 2018 for employers with 20 or more employees and 1 July 2019 for employers with 19 or fewer employees and is a mandatory obligation.
Super stream is where all employers must pay employee superannuation guarantee contributions to an employee nominated super fund. It transfers superannuation money and information across a uniformed system between employers, super funds and the ATO.
This allows employers to stay compliant and improves efficiency when:
- Performing superannuation in a single lump sum and transaction, even if there are different super funds for each employee.
- Rollovers from one super to another and additional contributions can be processed faster.
- Decrease in lost accounts and unclaimed superannuation money.
Payroll Tax compliance
Payroll tax is a self-assessed general purpose state and territory tax assessed on the wage payable by an employer to an employee. This happens when the total wage bill of an employer exceeds a threshold amount.
When your total wage bill exceeds the threshold amount set out by the state or territory, you will need to pay a percentage of this as payroll tax.
Payroll tax rates and thresholds vary between states and territories.
State and territory revenue officers conduct ongoing audits and investigations to ensure that payroll tax is being met. Employers that either fails to register for payroll tax or knowingly neglect to register despite knowing they have to will be penalised.
Businesses who also fail to consider the group wage, which puts them over the threshold, incorrectly classify employees as contractors or fail to declare fringe benefits and share schemes will also be penalised.
The Medicare levy helps fund the cost of Australia’s public health system. The Medicare levy is two percent of your employee’s taxable income, in addition to the tax you pay on their taxable income.
Medicare levy is collected the same way your income tax is. The amount an employer withholds from their employee includes an amount to cover the medicare levy.
Individual income tax rates
Individual income tax rates show the amount of tax payable on every dollar for each income bracket.
Workers Compensation Insurance
Workers compensation is a form of insurance that is made payable to your employees if they injury themselves at work or become sick due to a work.
An employee needs to take out Workers compensation so that you and your employees are covered.
Workers compensation is governed by the individual states and territories in Australia and includes the following:
- Wages while the employee is unfit for work
- Medical expenses and rehabilitation
For more information on workers compensation insurance for each Australian state and territory follow the link.
Employer obligation for collection from salary or wages
Various penalties and offences will occur if this payment is not met.
Employer registration for working holiday makers
If you employ or plan to employ working holiday makers with either a visa subclass of:
You must register as an employer of a working holiday maker before the first payment to them is made.
To register as an employer of a working holiday maker you first need to register for PAYG withholding and you need to check the status of the worker’s Visa Entitlement Online Service.
Keeping up with the latest Australian payroll Changes
For more information or to keep up to date with the latest payroll changes, visit
Are you confident that your organisation’s payroll is compliant? By partnering with us, you can confidently pay your workforce regardless of the pay complexity or jurisdiction that they operate in. Get in contact with our expert Laura for a custom quote.