Owning a small business can be exciting and challenging. However, it also comes with a myriad of responsibilities, both legal and practical. When it comes to payroll, accrued vacation time, superannuation payments, and paying appropriate taxes for employees and the business, record keeping is essential. Without the proper record-keeping tools a business could make several errors that could be financially and legally costly.
First, it is important for all business owners to fully understand the number of employee-related items that require monitoring. Some of these items include;
- Fair wages for the work being done; it is unlawful to underpay an employee or to increase their responsibilities without a commensurate increase in compensation.
- Proper accounting of wages paid
- Payment of taxes on behalf of the employee and the business
- Calculation and investment of superannuation funds
- Timesheets and attendance rosters
In addition, it is important that each employee have an employment file that contains copies of any documents provided to the employee. The file should contain the employee’s personal information, including contact information and government identification numbers for the purpose of paying taxes. The file should be kept confidential and only the employee, the employer, and staff associated with the finances of the company should have access to the information.
Helpful Tools You Can Use
There are many tools available for employers to use for the requirements outlined above. Here are some examples.
Fair Wages Calculator/Information: Proper record keeping should include being fully informed regarding the minimum wage requirements for your industry. These requirements can be found on the Fair Work Ombudsman’s website and the Australian Taxation Office.
Proper Accounting of Wages Paid: Keeping a proper accounting of wages paid can be done manually using an accounting ledger. But there are better ways in which to keep these records electronically. Many small companies use commercial programs that can be purchased in an online format or downloaded onto their own server. These programs allow employers to keep track of wages paid and often also offer features that will calculate tax contributions for employees, as well as keep track of accrued time off and superannuation payments/investments.
Payment of Taxes on Behalf of Employees and the Business: If your business is large enough and profitable enough, it might be wise to use an accounting firm for your payroll and tax payments. However, if not and you need assistance, the Australian Taxation Office has resources available including the Pay and Conditions tool.
Calculation and Investment of Superannuation Funds: While these calculations can be managed in-house, this is another area where an accounting firm can be of assistance. Again, the Australian Taxation Office has particular links which can assist you in making proper calculations for superannuation. One such site is here.
Time Sheets and Attendance Rosters: If your business uses commercial software, then you will be able to keep track of time sheets and employee attendance electronically. However, if not you can use fillable templates for each employee that you can keep in their employment folder.
Of all of these concerns, the two most concerning areas for making an accounting error are in underpaying your employees and improperly paying your taxes. In both instances, an employer can take quick action to remedy either situation. To remedy an underpayment to an employee, first calculate the number of days of the underpayment. Next, calculate the actual underpayment and the corresponding taxes owed. Finally, make the payment to the employee and to the Australian Taxation Office. While there may be penalties for your errors, the sooner you find the errors and correct them the more you may be able to mitigate any penalties or awards against your business.
