As the new financial year fast approaches, now is the time for HR and Payroll managers to get ready for Single Touch Payroll – STP – which will be mandated from 1 July 2018 for “substantial businesses” – those with 20 or more employees, based on their headcount as at 1 April 2018.
For businesses with less than 20 employees, STP does not come into effect until 1 July 2019.
Under STP, employers must report payments to employees, PAYG amounts withheld, and superannuation contributions to the Australian Tax Office (ATO) at the time of payment. This means these events now flow from payroll, and then on to the ATO via the automated and end-to-end STP process, requiring minimal human intervention or multiple data inputs and pathways.
Digitising payroll to enable STP
One of the requirements of STP is the need for businesses to use compliant payroll software, or use a third party such as a registered tax agent to lodge on their behalf. Cloud-based payroll systems are particularly useful here because of their ability to easily communicate with external software via an API.
For organisations that have not automated their payroll system into a software-based one, naturally there will be a period of adjustment to using a software system. There is no avoiding this however, because from 1 July 2019, STP-compliance will apply to businesses of any size. The only way to be compliant is to migrate any manual or paper-based payroll processes to a digital solution.
Payroll software providers must also ensure that their software is updated – or risk non-compliance and customer churn. Similarly, businesses using existing payroll software solutions need to contact their software provider to make sure that their provider’s solution is STP-compliant.
Overcoming challenges to outdated payroll systems
Today, payroll plays a mission-critical role that includes paying employees correctly, and acting as a feeder to other stakeholders across various lines of business.
There are however inherent challenges when it comes to running a payroll efficiently, including inaccuracy, inflexibility and the propensity for human error.
Another challenge is disconnected payroll systems that are either separated from the HR function or lack an employee self-service system – which can lead to data required by business stakeholders becoming trapped inside the payroll, meaning the payroll administrator must manually access and distribute that data.
Cloud-based payroll software, such as ELMO Cloud HR & Payroll, has come a long way in the past decade, offering solutions to many of payroll’s challenges, including the ability to unlock fragmented and trapped data and improve the overall reliability and quality of payroll services.
For instance, cloud-based payroll with built-in functionality can now integrate with online accounting and HR platforms – covering areas such as employee self-service, onboarding, offboarding, performance management and remuneration systems – making it much simpler to analyse and distribute data seamlessly. The ubiquity of the internet also means the payroll system can be accessed anywhere and at any time.
Is your business STP ready, and importantly, is it digitally ready?