Payroll has become a hot topic - especially in franchising! It’s no surprise since it’s one of the more complicated aspects of running a business. This means that it’s relatively easy to make mistakes. But putting the mistakes aside, the big issue we see is that too many businesses and franchise owners are burdened by cumbersome payroll processes. There are more headaches with payroll than there need to be. That’s why we are so keen on helping business owners use technology to help with payroll processes.
Why is payroll such a headache?
Payroll headaches are frequently caused by a combination of the complexity of award conditions and the array of recording methods franchises use. We can get clues about the areas of difficulty from the work done by the Fair Work Ombudsman. Their investigations have highlighted areas prone to errors. These include incorrectly prepared pay slips, failing to pay the correct overtime and penalty rates, and underpaying staff.
Part of the challenge is that payroll calculations for staff paid under the Modern Awards (for instance, the Fast Food Award 2010) can be genuinely tricky. If you’re relying on manual calculations a mistake can easily be made - even if you are being careful!
As further evidence for just how hard this is, in 2016, we asked a room of 70 franchise accountants to calculate one person’s pay from a timesheet. Not one person got the correct answer!
Through our work, we’ve come to appreciate the situation of franchise owners - and why this makes accounting tasks (like payroll) so daunting for many. Most have no prior experience of calculating pay or processing payroll. They may never have dealt with hourly paid staff or the complications of penalty rates. Someone in the accounts department where they used to work would have taken care of the pay calculations and reporting.
But in their own business payroll is the owner’s responsibility. It’s their job to implement systems that ensure people are paid the correct rate for the hours worked and that payroll record keeping complies with the legal requirements. They also the need to get entitlements and leave allowances right, and pay tax and super as required by law. All this on top of the day to day aspects of running the business!
The practicalities of payroll (for most people)
In our work with franchisees, helping them with their bookkeeping and tax, we see the burden many face with their payroll calculations.
A common situation is that hours are tracked on a spreadsheet or point of sale system, or possibly a rostering system. The owner then has to apply the hourly rate (which varies depending on whether overtime or penalty rates apply). Sometimes this is done in a spreadsheet, sometimes in the accounting software. This type of workflow is wide open to errors and opens up room for disputes. On top of this is the time taken by the business owner, their staff, their bookkeeper. And the massive headache for anyone trying to check whether pay is correct.
Questions that are - or should be - in the owner’s mind include: Were the hours recorded correctly? What about break times? Have they been correctly input to the accounting system? Is the pay rate correct in every place it is used? Have overtime hours been identified? Did we update the system for the award rate increases? What about when someone has a birthday? It doesn’t take too much thinking to realise there is scope for human error all over the place. We know this happens. We’ve seen it! So what’s the solution?
Better technology
Payroll doesn’t need to be hard to do. But to address the headaches we need to appreciate that one big thing to get right is the pay
calculation. In other words, that the right rate is applied to the hours worked, and any allowances are correctly accrued. The best way we know to reduce the risk and reduce the time taken to process payroll is with a system that builds in the award structure and rates. By this we mean the business owner doesn’t enter this information, it comes from a third party.
Our approach
We have put together a package to help franchisees (or any business owner) implement cost effective payroll software that automates the Award Compliance side of things. For instance, it means the pay rates are automatically updated when the Award changes, or when an employee has a birthday. It also handles pay slips, leave calculations, Super, and ATO reporting. And it can work with the commonly used rostering platforms.
The cost of the software itself is $6 +gst per employee paid each month. You only pay for what you use! Most owners using it are now running their weekly pay in just minutes. Even better, it can be up and running within a week. Please contact us if you would like more information.
