This page provides some tips to follow when outsourcing your payroll. It's all really simple but is often overlooked.
To legally provide certain payroll services you must be a registered BAS agent. The Tax Practitioners Board lists the tasks which are a BAS service and can therefore only be done by a BAS agent on this web page: http://tpb.gov.au/TPB/Register/0320_BAS_services.aspx
One of these tasks is: Ascertaining the withholding obligations for the employees' of your clients, including the preparation of payment summaries.
So if your payroll service provider is not a BAS agent then they cannot legally perform these tasks:
WARNING: Many payroll service providers are not BAS agents!
How to avoid this mistake: Ask for the organisations BAS agent number and check it on the BAS agent register.
As a Chartered Accounting ANZ practice we are required to undergo a periodic quality assurance review to ensure that our services are provided at a consistently high quality. We are bound by a code of ethics and confidentiality and we are reuqired to undergo continuing professional development to ensure we keep up to date.
Chartered Accountants Australia and New Zealand is arguably the most professional association for accountants in Australia.
Payroll service providers often hold your funds in trust. This occurs if you pay them and then they transfer that money to the employee, superannuation fund or ATO.
A simple solution is to pay all the disbursements yourself. However, this is more work as there can be many disbursements. Don’t forget the idea with outsourcing is to get someone else doing this work.
One requirement of Chartered Accountants Australia and New Zealand is to maintain trust funds separate from the payroll service provider funds in a special Trust bank account. Trust funds are required by Chartered Accountants Australia and New Zealand to be audited every year.
WARNING: If the payroll service provider does not operate a special Trust account for trust funds and they go bankrupt you will rank as an ordinary creditor.
One of the problems a lot of people find is that after outsourcing their payroll they are still doing it all. Web based software is great, even necessary for a payroll service. However, if you are the person who is pushing all the buttons then you are really just getting software not a service.
Software is much cheaper than a service. Why pay for a service and only get software.
WARNING: If your plan is to outsource it make sure you are not the one pushing the buttons.
Your payroll service provider needs to have specialist payroll software. In processing payroll there can be many contacts each pay run. If you need to make an adjustment you don’t want to be waiting on faxes.
Information needs to be transferred securely. It is a breach of the privacy act to email a Tax File Number (TFN) without encrypting it. If you have more than about 5 staff you will want to use an EFT file for the bank transfers. This EFT file needs to transferred securely.
Email is not encrypted and is not secure.
WARNING: Most accountants and bookkeepers do not have the software to transfer confidential payroll information securely and efficiently.
I’ve never had a client who wanted a short term payroll solution. I know that if I do a good job my customers will never leave. So you really have to wonder why a payroll service provider needs to have a lock in contract with a break contract penalty fee.
The reason is that their marketing is better than the payroll service. Don’t be fooled.
WARNING: Don’t sign any lock in contracts there is no need for either party to have this.