Keeping up-to-date on your payroll governance program

 

As part of a best practice and cyclical governance program, it is important to periodically review key impacts of recent and proposed legislative change. Let’s review seven key areas of legislation in Australia and what you should be looking at in November within your payroll governance review.

1. Increased minimum wages

The Fair Work Commission reviews the minimum wage annually, and this year, it was raised to address the rising cost of living - which is a significantly higher increase than we have seen in prior years, sitting at 5.75%. Where employers have been paying well above minimum, we are seeing FY24 has not provided a coverage to minimum that it previously may have.

It is now time to ensure each of the industrial instruments you are covered by (including Modern Awards) have their current pay guide rates reviewed against your payroll system. This also includes allowance increases. Also, remember some EBA and negotiated agreements are impacted with minimum wage uplift to allowances despite it being clear or tabled in the document itself.

We also recommend documenting the classification of each employee clearly in your review. Keep in mind employees may be impacted by continuous service – and progress to a higher pay grade simply based on their length of service.

During this time other changes may be made to various industrial instruments. Most recently, there have been changes to overtime and penalty rates on the Professional Employees Award which may require to you look at how employees are paid.

2. Single Touch Payroll (STP)

The Australian Tax Office introduced the STP system a few years ago and is undergoing some important enhancements to follow up on employer non-compliance. Most employers are now using STP Phase 2 lodgments, or those with deferrals may now be nearing the end of the period they can continue without the upgrade.

We recommend using a periodic Payroll Code review in line with your STP coding as a robust way to ensure your codes are correct for:

  • PAYG-W

  • allowance allocation

  • ordinary time earnings (OTE)

  • and superannuation.

3. Superannuation Guarantee (SG)

By now everyone in your payroll system should be reflecting the 1 July 2023 SG rate increase from 10.5% to 11%.

After the completion of the first SG quarter for FY24, we recommend an assessment is made on your:

  • Payroll system capping and maximums

  • superannuation balance sheet accounts for returned or non-remitted funds

  • fund payments to ensure they are clearly reconciled to your YTD payments.

Assessing these items as part of your governance payroll program is essential for entering the second SG quarter with a clean slate.

4. Annual leave loading

The definitions around annual leave loading and the treatment as OTE is a complex area for many businesses to navigate. The ATO advise how to best allocate and structure your leave loading payments as true OTE or where it is clearly linked to overtime. The outcome of this treatment also aligns back to your mapping in STP Phase 2. If you are unsure on your current stance on annual leave loading in your business, now is a good time to review as we move into a period of historically high leave periods and breaks over the holiday season.

5. Record-keeping and compliance

It is no surprise employers are required to maintain accurate records for compliance with Fair Work obligations. Fair Work states, “Adopting best practice record-keeping makes it easier to keep track of employee details, identify payroll mistakes and keeps a business running efficiently. It also helps avoid fines for doing the wrong thing.”

As businesses move into peak trade periods, it is a great time to have a clear understanding of the record keeping the business is managing. We recommend periodically sampling current records against the Fair Work record-keeping requirements, beyond a normal audit cycle, for a solid payroll governance program.

6. Enhanced employee entitlements

A definite “watch this space”, there are many Bills and legislative proposals in place to foster a better work-life balance in Australia, with enhancements to employee entitlements. Some of these proposed changes include:

  • The proposed introduction to a “Right to Disconnect” amendment to the Fair Work Act

  • changes to paid parental leave (PPL scheme)

  • directed Annual Leave / Shut Down Leave

  • flexible work arrangements.

We recommend periodically reviewing all legislative headlines through the Fair Work Newsroom. You can filter to your review month to see announcements for changes. For example, we can see in November that from 6 December 2023, the new rules for Fixed Term Contracts comes into effect.

7. Fixed Term Contracts

From 6 December 2023, there will be new obligations on engaging employees under fixed term contracts. Employers will be required to issue a Fixed Term Contract Information Statement (FTCIS) in addition to the standard Fair Work Information Statement. Several guiding principles on fixed term contracts and when exceptions may apply will also be introduced.

We recommend conducting an audit of all current fixed term contracts in place and reviewing the full list of new rules for fixed term contracts so you can begin to build out a robust governance plan for fixed term contract management.

What’s Next?

We continue to navigate complex, constant and far-reaching impacts of small legislative changes in our industrial relations space. These changes impact every part of the employee lifecycle, and payroll outcomes.

Your payroll governance program will help plan for, implement and assess impacts within your payroll function. It is proven to be a continuous cycle that is far from a ‘set and forget’ plan.

So what are you waiting for? Now is the time to review your business’s payroll governance program to ensure the above legislation changes are reflected. If you would like to discuss any of the above changes and how it affects your business, please get in touch.

 
Andrea ChwalkoThe Payroll Advisory Co.