5 Australian Payroll Trends to Look Out for In 2020
We take look at 5 Australian Payroll trends that business should look out for in 2020.
1. Single Touch Payroll (STP) | The continued evolution
Single Touch Payroll (STP) is now well embedded in Australian Payroll Processing DNA. Payment Summaries are a thing of the past.
Since its introduction in July 2018 (initially compulsory only to employers with 20 or more employees), we have seen an increasing number of companies adopting this new reporting methodology throughout the financial year (2018-2019).
In September 2019, STP was made compulsory for all Australian employers. As of November 2019, 520,0000 businesses/employers were using STP for reporting with 11 million individuals accessing their live income statement through the MyGov platform, of 8-9 million have an active MyGov active.
The final step of the STP roll out will mandate the requirement to lodge earnings quarterly for closely held payees of small employers in July 2020. Closely held payees are those who are ‘not at arm’s length’ from the entity they receive payments including:
- Family members of a family business,
- Directors or shareholders of a company,
- Beneficiaries of a trust.
For small businesses with unpredictable annual profits & director earnings, this may pose a problem for Directors who previously declared earnings at the end of each financial year.
The ATO has already started analysing the STP data received. They are currently looking at Superannuation Guarantee ensuring payments are being processed on time.
2. Single Touch Payroll | Systems Migration
There has been an increasing number of companies looking to migrate payroll systems since the introduction of Single Touch Payroll (STP).
This trend is due to multiple factors, some of which are detailed below:
- Looking for better technology (cloud-based software, time & attendance, employee self-serve, single touch payroll).
- Single Touch Payroll (STP) has also been the death knell for some legacy platforms or modules that could not justify investing in development requirements to comply with STP.
- Watch out for continued market share capitalisation from modern cloud-based pure payroll & rostering systems such as KeyPay,
- Better integration with other systems (accounting or HR Platforms),
- More Compliance,
- Payroll Expertise by outsourcing the payroll function.
Before STP, companies just needed to export & import year to date earnings from one system to another and only issue payment summaries from their current system.
With the introduction of STP, the payroll data is reported to the ATO on a pay event basis (in real time), impacting migration of employee’s earnings.
So, what are the options to get this right and ensure there are no issues at the end of the financial year?
- Migrate your year-to-date employee information to the new payroll solution. You will need to zero the employee year-to-date values from the old payroll solution through an update event to prevent duplicate information being displayed.
- If you do not migrate year-to-date employee information to the new payroll solution you can start reporting your employee year-to-date amounts from zero. You will need to finalise the employee information reported under the original payroll solution.
- Migrate your year-to-date employee information to the new payroll solution and use the original BMS identifier in future pay event reporting.
Your existing payroll provider should be able to guide you through the process.
3. Annual Salaries in Modern Awards
From 1 March 2020, the obligations of many employers who pay their employees an annual salary in modern awards are changing.
The Fair Work Commission is introducing changes to the terms of several modern awards which will mean that from 1 March 2020 there will be new obligations on employers paying annual salaries.
These changes have a direct impact not only on HR departments, but also company culture, payroll processing & systems.
As a business, you need to ensure your payroll system is ready for such changes. Below we list system’s requirements needed to accommodate new obligations:
- Awards updated with new rules,
- The ability to have salaried employees on timesheets for record-keeping only,
- Roster functionality is ideal,
- Being able to report expected worked hours vs actual hours worked,
- Backpay calculations & taxation available (when applicable).
It is clear that these changes will have a significant impact on payroll professionals from a system point of view and processing. The practice of recording start/finish/unpaid break times for salaried employees, and performing an annual reconciliation, will be completely new for many Payroll & HR practitioners.
The new onus on white-collar industries will be particularly interesting. Businesses with largely office-based professional staff have largely escaped the microscope surrounding modern award compliance to date. This might be set to change. The culture shift to recording specific hours worked has the potential to catch out businesses where this has traditionally been overlooked.
Importantly, failing to comply with the new requirements will be treated just like any other breach of a modern award, and will mean that employers can be subject to significant financial penalties.
If you want to find out more, about how these changes may impact your business, you can watch a recording of our recent webinar on how annual salaries in modern awards are changing.
4. Salary Sacrifice & OTE
A bill introduced to close a loophole used by some employers to reduce their super contributions to their employees came into effect on 1st January 2020.
The Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019, prevents employers from counting any salary sacrifice contributions made by employees as part of the employer’s statutory Salary Sacrifice & Superannuation Guarantee Contributions (SGC) when meeting minimum superannuation payment obligations.
Prior to the introduction of this bill, employers typically calculated employees super guarantee contributions using one of three methods:
Method 1: Based on the base salary (before any salary sacrifice is deducted);
|Base salary per quarter||$25,000|
|Superannuation (SGC) ($25,000 x 9.5%)||$2,375|
Under this method, the salary sacrifice deduction is not considered when calculating the 9.5% SGC.
Method 2: Based on the taxable salary (after any salary sacrifice is deducted);
|Base salary per quarter||$25,000|
|Superannuation ($22,500 x 9.5%) =||$2,137.50|
Under this method, the salary sacrifice amount is excluded from the 9.5% SGC calculation and the final superannuation calculation is lower than Method 1.
Method 3: The salary sacrifice amount is considered as part of the superannuation guarantee contribution by the employer;
|Base salary per quarter||$25,000|
|Salary Sacrifice (Included in SGC calculation)||$2,500|
Under this method, the employee’s salary sacrifice amount is included by the employer as part of their SGC and no additional employer superannuation contributions are paid.
With the introduction of this bill, Method 2 & Method 3 will no longer be acceptable. The superannuation guarantee contribution will need to be calculated using Method 1 only, based on the employee’s salary base.
Employers will not be allowed to factor in the post-salary sacrifice base or utilise the employee’s salary sacrifice super as part of their superannuation obligations.
5. Personal/Carer’s Leave
On 21 August 2019, the Full Federal Court of Australia handed down a decision regarding the accrual of personal/carer’s leave for shift workers (Mondelez v AMWU & Ors case). The decision deals with the method of accruing and taking paid personal/carer’s leave for the purposes of the National Employment Standards under the Fair Work Act 2009.
Prior to the decision in Mondelez v AMWU and Ors, the general understanding was that employees were entitled to 10 days personal/carer’s leave per year, based on 7.6 hours a day, i.e. 76 hours per year.
The court found that a Mondelez staff member who worked three 12-hour shifts each week accrued 120 hours of leave each year (based on 10 days x 12 hours). In other words, the court applied the accrual rate of 10 days each year based on the number of hours the employees actually worked in a day, as opposed to an accrual-based on a maximum of 76 hours per year.
The decision has potentially wider application to any business who employs staff on a part-time basis. For example, take a situation where two part-time employees both work 24 hours each week, but one chooses to work their hours across five shifts and the other across four shifts, under the new decision one employee would be entitled 48 hours personal leave per annum (10 x 4.8 hours), while the other 60 hours (10 x 6 hours).
Permission to appeal the court decision has been granted to the employer & the Morrisson government, and it is still pending resolution. We would recommend that employers seek advice before altering their methods of accruing leave.
Our friends at KeyPay have announced the introduction of a new personal/carer’s leave category that complies with the Fair Work Commission’s decision on the accrual of this leave (by days per day worked). You can read more on their solution for changes to accrual of Personal/Carer’s leave.
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This article was originally published on 28 January 2020; edits have made as additional information has become available. Last updated 18 February 2020.