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All employers know how important it is to treat your employees well as they are the backbone of the business. So when it comes to compensating them for their efforts, you want to make sure you do it right.
Paying employees isn’t always as simple as sending them a cheque. This is because of a number of factors that come into play, such as:
- Is my employee permanent or casual?
- What are their working rights?
- Do I have record-keeping obligations?
- How does superannuation work around this?
- What about insurance?
- What obligations do I have according to Fair Work Australia?
So, when you pay your employees, you also have to think about your employer obligations and their minimum entitlements to make sure they’re being compensated correctly (if you’re not sure how much you should be paying your employees, you can use Fair Work’s calculator here).
This article will guide you through all the key things you need to consider when paying your employees (and ways you can make the process a lot easier!)
What Is A Payslip?
When employees receive payment, it isn’t always the same for everyone. For example, some employees might receive certain deductions, or receive more money for overtime work. Since each payment is personalised depending on a number of things, each employee gets their own payslip.
What Is Included On A Payslip?
While most payslips are personalised, they should generally include the following:
- Employer and employee’s name
- ABN
- Pay period
- Gross and net pay
- Applicable hourly or salary rates (and the number of hours worked)
- Any other paid entitlements (for example, casual loading)
- Authorised deductions (for example, superannuation or health insurance contributions)
- Superannuation contributions (employees are entitled to a contribution of 10% of their earnings).
- Employee’s employment status (for example, are they a part-time or full-time employee?)
- Any Award that the employee falls under
- Employee’s bank details
Despite any small differences between each employee’s pay slip, it should note the final amount that they get to take home. It’s also important to remember that pay slips have to be given to employees within 1 working day of the pay date (this applies even when an employee is on leave).
Fair Work has discussed the rules around payslips in more detail here.
Do I Need To Register For PAYG Withholding?
Employers usually collect PAYG withholding amounts from their employees’ wages to help them with their end-of-year taxes. So, you’ll need to register for PAYG withholding if you make payments to:
- Employees
- Contractors
- Businesses that don’t provide their ABN to you
Once you’ve registered, you collect certain amounts from their payments and send it to the Australian Taxation Office (ATO). If you’re not sure how to calculate the tax you need to withhold, you can use the ATO’s PAYG calculator here.
Thankfully, to make the reporting process much easier, employers can use Single Touch Payroll.
Single Touch Payroll (STP)
As we mentioned earlier, employers need to report the amounts withheld from their employees to the ATO. This can be done through Single Touch Payroll, and is a requirement for all employers registered for PAYG withholding.
So, what kind of information do I send?
- Salaries and wages
- Pay As You Go (PAYG) Withholding
- Superannuation
Thankfully, this new way of reporting is automatic (but you’d need STP-enabled software).
It’s important that employers understand their obligations around PAYG withholding as there are penalties for non-compliance. The ATO has provided guidelines for how to use STP here.
How Do I Generate Payslips For My Employees?
Each employer might have their own preference for how they issue payslips to employees. For example, you might provide an electronic version if you like to keep all your important files in one accessible place.
If you do opt for electronic payslips, Fair Work requires that they:
- Are sent via email or into an electronic personal account, and
- Are in a printable format
Other employers might prefer to give payslips in printed form. However, it might be easier for payslips to be given electronically as it’s easier to send through email, and it won’t take up any physical space. It’ll also be much easier to access when you’re trying to report payslip details to the ATO.
No matter which form you prefer, a template usually comes in handy. This makes it a lot quicker to issue the payslips and ensure you include all the correct information.
Do I Have An Obligation To Keep Payslips?
Fair Work makes it very clear that employers have an obligation to keep employee records for at least seven years (this includes pay records). There are also other requirements around this, such as:
- Ensuring there is no false or misleading information
- Ensuring the records are not altered
- Ensure it is in a form that is accessible to a Fair Work Inspector
Payslips are only one of the general records you should be keeping – Fair Work has listed other records you should be keeping here.
What If I Don’t Have The Correct Information On The Payslips?
We all make mistakes, but when it comes to payslips, you want to make sure you double check the details on it every time. This is because it outlines each employee’s entitlements depending on their circumstances and their award, so it’s evidence that you have been providing them with the right payments.
If there is incorrect information on a payslip, you could be faced with an infringement notice, which is basically a fine. Usually, you’d have 28 days to pay this fine. This could be:
- Up to $1,332 for a person
- Up to $6,660 for a company
Things can get more serious if the information on the payslip is false or misleading, and the employer is aware of this. This applies to any records that need to be kept under Fair Work employer obligations.
For an individual, the penalty can go up to $13,320 and for a corporation, it can be as high as $66,600. In even more serious cases, the matter can be taken to court (for example, if you repeatedly and intentionally breach your record-keeping obligations).
How Can I Avoid This?
To avoid these kinds of mistakes, it’s important to encourage your employees to raise these issues with you when they do arise. Similarly, if you do identify the error, it’s your duty to notify employees and fix it right away.
For example, if you’ve accidentally paid your employee less than required, you should notify them and pay them the owed amount as soon as possible. It’s also worth noting that if an employee requests access to any of their employee records, it’s your obligation to provide them with this.
The key thing to remember is that you should always try to sort out any issues with your employees first, before you take next steps. This way, you can avoid heavy or unnecessary fines, or even court.
Need Help?
Payslips are part of every employer’s obligations to their employees, but it can also be easy to make a mistake. This is the last thing you’d want, as the fines can be overwhelming and you wouldn’t want to face an infringement notice over a tiny error.
To avoid these kinds of issues, you should always remember to:
- Check that the details of your employees are correct (for example, if they are a casual worker, are you paying them the correct amount?)
- Issue the payslip at the correct time
- Check that their wages are accurate (for example, if they are under an Award)
- Ensure that payslips comply with the relevant requirements (for example, it must be in an accessible format)
- Make sure you have more than 1 copy of each payslip just in case
If you need help sorting out payslips or any other important employee records, you can reach out to us at team@sprintlaw.com.au or contact us on 1800 730 617 for an obligation-free chat.
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