RINGING THE CHANGES IN PAYROLL
The many complexities of payroll means that business owners, intermediaries and service providers are forever being kept on their toes. 2017 will be no different.
THE MANY COMPLEXITIES OF PAYROLL MEANS THAT BUSINESS OWNERS, INTERMEDIARIES AND SERVICE PROVIDERS ARE FOREVER BEING KEPT ON THEIR TOES. 2017 WILL BE NO DIFFERENT.
NZBUSINESS REVIEWS THE MARKETPLACE AND IDENTIFIES SOME KEY CHANGES AND TRENDS.
Batten down the hatches, because the Government and Inland Revenue have announced another raft of changes coming for the payroll sector over the next few years.
The overall aim is to help businesses move from paper to electronic filing of PAYE. So for starters, new legislation will be introduced this year to require electronic filing from 2019.
To quote from a BusinessNZ statement released in November 2016; “Employers above a certain tax threshold would be required to file electronically, unless they do not have relevant computer or Internet access, and PAYE filing would need to be integrated into their payroll software to allow electronic filing to occur.
“Smaller businesses would have the option of staying with paper filing or moving to electronic filing, and electronic filing would still be possible via the IRD website without having to purchase payroll software.
“Businesses would be able to choose whether to file electronically on the actual payday or to continue to file monthly or twice-monthly as currently.”
Steve Nathan, Crystal Payroll’s sales and marketing director, says while not coming into effect until April 2019, the pending major changes to how employers report PAYE (including IRFiling) to Inland Revenue need to be part of the conversation now.
Systems will need to be updated in 2018 and this is not a minor update, he says. He also thinks it likely that some payroll providers won’t be able to handle the change.
“Holiday pay-related issues will continue to be a problem for some employers too,” he says. “Even if it doesn’t directly affect them or their staff.
“The fact that there’s been so much media coverage, and labour inspectors and unions asking questions, sows seeds of doubt and causes employers to second guess their systems.
“The Holidays Act is a fairly simple piece of legislation which is badly applied, largely due to the fact that it was written for a time when employees took time off in large chunks, like weeks, when the reality is employees take time off in increments as small as hours.”
Another payroll issue impacting on business owners is the increasing shift from PC-based payroll systems to cloudbased ones.
“This year more and more employers will be looking at whether their existing PC-based system will meet their needs,” says Nathan. “And given projected changes like those mentioned around IRFiling, now’s the time to change [to the cloud].”
Martin Gleeson, managing director of iPayroll, the provider that’s now in its 17th year of operation as a pure cloud-based solution, says the proposed IRD changes will be seamless for clients using payroll intermediary services as the payroll intermediary (PI) will be responsible for compliance as per usual.
“Where the complications will arise and which have yet to be explained by IRD is how the variations – of which there are thousands every month – will be managed. Currently PIs and the majority of employers process pays for one month and file returns on the 20th of the following month. This give PIs and employers time from the 1st to say 18th of the subsequent month to reconcile everything and then submit the data, along with the payment, to IRD.
“Under the proposed new regime PIs and the majority of employers will be required to submit electronically all payroll information no later than two business days after payday.
“Any subsequent adjustments that may be required, including back loaded payments for employees (overpayments and underpayments), back loaded payrolls for new start-ups, and a multitude of other variations that occur every pay period will have to be processed by IRD somehow.
“It will require a very interactive service with PIs and employers being able to delete or alter data already presented and this could happen for every payroll,” says Gleeson. “Currently the monthly process is complicated enough but at least there is reconciliation time available. This will disappear under the proposed regime.”
What may happen, especially since the Payroll Subsidy is due to be cancelled, is that PIs will no longer manage this process on behalf of employers though the PI scheme, Gleeson says. PIs will still enable the processing to take place but any variations will have to be dealt with by employers directly with IRD staff.
“The IRD help desk will need to be significantly enhanced for this to happen.”
Gleeson believes non-binding would be a far better proposition, at least in the early years.
FINDING THE IDEAL PARTNER
When considering payroll providers, remember that a good payroll system should meet your needs now so you’re not paying for features or functionality you’re not using. At the same time it should have the ability to scale, integrate or ‘addon’ new functionality as your business grows.
Scott Gardiner, strategic programs manager at MYOB, suggests you ask yourself the following five questions when weighing up providers: 1. Can you work online? The cloud is fundamentally about cost, security and flexibility. Choose to work online, offline, from any device and from any location. Plus online means peace of mind with superior security and regular backups. 2. Does it help meet your employer and compliance obligations? Cloud-based payroll solutions are automatically kept up to date with IRD changes so you never have to worry about upgrading desktop installations again. You’re always kept compliant with tax, ACC, student loan and KiwiSaver rates. They store time and wage records and produce reports on demand to clearly track leave entitlements and meet your record keeping obligations. Plus, those with an intermediary feature help you meet your PAYE obligations and ensure PAYE payments and IR reports are filed on time. 3. Does it streamline payroll processing? Leave it to the software to take care of the pay and leave calculations for you. Use it to automate the data capture of timesheets, automatically generate payslips for employees, lodge PAYE payments and reports for you and integrate with your accounting software. This all saves time and errors by removing double handling and manual data entry and provides you with better visibility of labour costs. 4. Is it easy to collaborate? The cloud lets you easily connect with your business advisor, accountant, bookkeeper and/or payroll provider. Set roles in your software so that you’re all working off the company file in real time rather than having to post or fax shoeboxes of timesheets and paperwork. 5. Does it come with phone-based payroll support? Payroll tasks are time-sensitive. When you’re under pressure and need help, make sure you have a support team to quickly solve any payroll problems.
iPayroll’s Gleeson believes a prime consideration when choosing a payroll partner is the calibre and experience of the help team. “Ensure its nationwide support is not from just a sole office,” he says.
Cloud delivery of payroll is pretty much a given in 2017, and people have pretty much got over their initial security fears.
“Think back ten years ago to Internet banking,” suggests MYOB’s Scott Gardiner. “People had the same security fears about accessing their banking online with just a username and password. Yet now, virtually everyone uses it.”
He points out that his company’s cloud accounting and payroll systems store client data in highly secure storage facilities – “just like Internet banking”.
“Many businesses running payrolls on their desktop face greater risks of data loss or corruption,” he adds.
Gardiner cites backup routines that are infrequent or non-existent, outdated operating systems and hardware that have a higher risk of failure, and company files stored on local devices like laptops without adequate password controls, all as examples of where desktop solutions can let businesses down.
“In many cases, having your data stored in the cloud adds far more data protection than businesses can achieve themselves.”
Crystal Payroll’s Steve Nathan agrees. “You probably have more chance of someone stealing your laptop with your PC-based payroll on it than you do of someone hacking your cloud payroll.”
Chris Mar, manager strategy and compliance at Datacom reminds us of the highly confidential nature of payroll data. “Yet in many cases this information is held insecurely in a
Most know the desktop days are over and cloud’s the way forward. [It means] better services, immediate updates, and 24/7 access for both employees and employers.” – Martin Gleeson, iPayroll.