Payroll tax issues solved cheaply
Small monthly fee — and a proven, easy-to-use online system eases IR tax requirements.
“The efficiency Xero Payroll can provide is that it is all online, automatically calculates leave entitlements and tax workings that you would have to do manually if you didn’t have software processing it for you.”
As anyone with the task of paying staff will know, everything changed at the start of the new tax year when payday filing was introduced by Inland Revenue (IR).
Until then, payroll managers had three to seven weeks to let IR know how much they had paid staff. Since April, they have just two days to complete Payday filing — or risk a $250 IR penalty for non-compliance.
Joanne Stanyer, of online accounting software company Xero, says that, four months on, many companies continue to use manual or semi-automated systems that do not file payday information at the press of a button.
That issue can be solved for much less than the cost of a single penalty charge. Users of the Xero accounting package can add an automated payday filing option from only $10 a month.
A key benefit of payday filing is that, rather than someone filling out a form once payroll has been completed, or logging into their IR account to enter the data, the payroll manager can send the information to the IR automatically from within the Xero platform when a pay run is completed.
“It can save people hours of work,” says Stanyer, Xero’s New Zealand product and strategy director. “If you are paying people every week then that is 52 forms you have to complete and send within two days of every pay run — our system makes it much simpler.”
She says some firms are still using paper-based systems and a calculator to work out the correct PAYE deduction — and that added responsibility had put even more pressure on many.
“The efficiency Xero Payroll can provide is that it is all online, automatically calculates leave entitlements and tax workings that you would have to do manually if you didn’t have software processing it for you,” says Stanyer. “Our software works out how much staff should be paid after deductions — just enter the employee’s tax code, their hourly rate and the hours worked for the pay period.”
Stanyer says performing these calculations manually for every employee, every payday, comes with risks. Sometimes a mistake made in the past can be carried forward week after week.
“The risk is that the correct amount of tax is not deducted and that may have a negative impact on the staff member at some point,” she says. “An employer really needs to make sure it is paying people correctly — because getting it wrong can be quite stressful.”
Another part of the Xero platform is about connecting business owners with their advisors, such as Xero certified bookkeepers and accountants. While the Xero system may not replace payroll specialists; the software makes the job easier.
“If you are not using a solution, payroll can be really complex,” says Stanyer. “You need to know how much tax to deduct, understand leave entitlements, statutory days...there is a lot of information to get your head around. Our payroll software takes a lot of that stress away.
“Once upon a time you needed to become a payroll expert but lots of tax rules are embedded into the software. Xero also steps users through the payroll process. It removes a lot of complexity and saves people time in researching the correct answer to common payroll situations.”
And because Xero is an online software platform — accessed via a web browser or smartphone app — updated centrally, there are no troublesome software updates to worry about.
“We have experts modifying the software all the time to help keep customers on the right side of tax law,” says Stanyer. “People using Xero will be compliant, and that offers peace of mind.”