RING­ING THE CHANGES IN PAYROLL

NZ Business - - CONTENTS - BY GLENN BAKER

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 CON­FIR­MA­TION

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.

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