Training Session 13 04 02 2021 Payroll explanation intro 2
Summary
TLDRThe video script is an in-depth guide on payroll management, discussing its impact on business finances and legal obligations. It covers various business structures, employee types, and the importance of understanding gross vs. net pay. The speaker plans to share resources for further reading and emphasizes the need for employees to understand their roles and entitlements. The script also highlights the process of setting up new employees in accounting software, including forms for tax file numbers and employment contracts.
Takeaways
- 📅 Payroll is a multi-day process that involves various concepts and is not rushed through each day.
- ⏰ The speaker plans to cover topics generally and then send reading materials for deeper understanding.
- 💼 Payroll impacts both the Profit and Loss (P&L) and the Balance Sheet, highlighting the financial implications of hiring employees.
- 💰 The cost of hiring includes gross salary, superannuation, and other payroll costs, all of which are reflected in the P&L.
- 📉 The Balance Sheet tracks obligations like superannuation payable and income tax deductions, which are not immediately paid out.
- 📈 Unbillable time, where employees are not directly generating revenue, is a factor in calculating the true cost of an employee.
- 🏢 Different business structures like PTY, companies, limited companies, trusts, sole traders, and partnerships can employ people.
- 👩💼 The types of employees include full-time, part-time, casual, fixed term, shift workers, probationary, apprentices, and trainees.
- 📝 New employees are required to fill out forms such as the Employee Information Form and Tax File Number Declaration.
- 🔗 The Tax File Number Declaration is crucial for tax purposes, ensuring accurate tax withholding and compliance with the tax system.
- 📚 The speaker emphasizes the importance of understanding and being familiar with the terminology and processes, rather than memorizing all details.
Q & A
What is the purpose of the speaker's discussion on payroll?
-The speaker is discussing payroll to provide an understanding of its concepts, its impact on profit and loss, and the balance sheet, as well as to prepare the audience for the practical aspects of managing payroll obligations and compliance.
How long is the speaker planning to spend on the payroll topic?
-The speaker does not specify an exact duration but mentions it will take a few days, with each session lasting around 45 minutes unless a natural stopping point is reached sooner.
What are the different business structures mentioned in the script?
-The different business structures mentioned are Pty (private companies), limited companies (public), trusts, sole traders, and partnerships.
Why is it important to consider the impact of hiring an employee on the profit and loss statement?
-It is important because hiring an employee adds costs to the business, including both productive and unproductive time, which must be evaluated to ensure the business can afford the new expense without negatively impacting profitability.
What does the speaker mean by 'unbillable time'?
-Unbillable time refers to the period when employees are being paid but are not directly generating revenue for the company, such as during training or when performing tasks that do not contribute to client work.
How is the employee's gross salary represented in the profit and loss statement?
-The employee's gross salary, including all associated costs like taxes, is represented as a cost in the profit and loss statement, divided by 12 months to show the monthly expense.
What is the role of superannuation in payroll?
-Superannuation is a mandatory pension contribution that employers make on behalf of their employees. It is tracked in the balance sheet under 'superannuation payable' and is paid out to relevant pension funds.
What is the difference between gross and net pay mentioned in the script?
-Gross pay refers to the total salary before any deductions, while net pay is the amount an employee receives after taxes and other deductions have been subtracted.
What are the various types of employees mentioned, and why are they important to understand?
-The types of employees mentioned include full-time, part-time, casual, fixed-term, shift workers, daily/weekly hire, probationary, apprentices/trainees, and outworkers. Understanding these types is important for managing payroll, benefits, and legal obligations appropriately.
What is the significance of the tax file number declaration form?
-The tax file number declaration form is crucial as it provides the employer with the employee's tax file number, which is used to group all of the employee's earnings for tax purposes and ensure the correct amount of tax is withheld.
What is the process for setting up a new employee in the company's payroll system?
-The process involves sending the new employee several forms for completion, including an employee information form, a tax file number declaration, and a contract. These forms collect necessary information to set up the employee in the accounting software like Xero and ensure compliance with tax and employment laws.
Outlines
📈 Introduction to Payroll Concepts
The speaker begins by discussing the payroll process, emphasizing that it will take several days and will cover various concepts. They plan to spend about 45 minutes on each day, stopping at natural points unless interrupted. The goal is to provide an understanding of payroll and its impact on the business landscape. The speaker will send reading materials and encourage attendees to take notes on key points. They will cover topics like business structures (e.g., PTY, limited companies, trusts, sole traders, and partnerships), payroll's impact on profit and loss, and balance sheets. The speaker also mentions the importance of considering an employee's productive and unproductive time and how it affects the business financially.
💼 Understanding Payroll's Financial Impact
This paragraph delves deeper into payroll's financial implications, focusing on how it affects the profit and loss statement and balance sheet. The speaker explains the concept of gross and net pay, using an example of a 50,000 annual salary. They discuss how the gross salary, including taxes, appears in the profit and loss, while the net pay is what the employee receives after tax deductions. The balance sheet is used to track superannuation (pension) and other payroll costs. The speaker also touches on the importance of understanding the legal obligations when hiring employees, such as compliance with regulations and ensuring timely payments of entitlements like leave.
📚 Employee Types and Onboarding Process
The speaker outlines various types of employees, including full-time, part-time, casual, fixed-term, shift workers, probationary, apprentices, and trainees. They emphasize the importance of understanding these classifications and their implications. The speaker then discusses the onboarding process, highlighting the need to send new employees all necessary information for proper setup. They mention sending forms like the employee information form and tax file number declaration, which are crucial for setting up employees in accounting software like Xero. The speaker also provides an example of a welcome email to a new employee, demonstrating a professional and welcoming approach.
Mindmap
Keywords
💡Payroll
💡Business Structures
💡Profit and Loss (P&L)
💡Balance Sheet
💡Gross Salary
💡Net Salary
💡Superannuation
💡Pay as You Go (PAYG)
💡Employee Entitlements
💡Legal Obligations
💡Employment Types
Highlights
Introduction to payroll process and its duration, emphasizing the complexity of concepts involved.
The importance of setting aside time for each payroll day, aiming for 45 minutes unless a natural stopping point is reached.
The goal of sending an email with reading materials for further understanding after the general overview of topics.
Payroll's impact on Profit and Loss (P&L) and Balance Sheet, including the costs associated with hiring employees.
The concept of billable and unbillable time in relation to employee productivity.
Differentiating between net and gross salary, with a focus on gross salary reporting in the P&L.
The role of superannuation (pension) in payroll, and its tracking in the Balance Sheet.
Explanation of other payroll costs such as payroll taxes and their allocation in the Balance Sheet.
The legal obligations employers face when hiring employees, including compliance and tracking of payments.
The process of hiring, from job advertisement to interviews, and the types of employees such as full-time, part-time, and casual.
The significance of understanding different employee types and their respective definitions and implications.
The importance of setting up new employees properly, including sending necessary information and forms.
Example of a welcome email to a new employee, emphasizing a professional and supportive onboarding process.
The necessity of collecting employee information for efficient setup in accounting software like Xero.
The role of Tax File Number Declaration in the payroll process and its importance for tax withholding.
Details on how tax information is used in accounting software to automatically calculate tax withholdings.
The process of lodging tax information and the shift from manual forms to digital submissions in Xero.
Transcripts
now we're going to start on payroll and
payroll will take
i don't know how many days it'll take
but it's going to take a few days
i'm not going to go i'm not going to go
for too long for each day because
there are a lot of concepts once i go
through
um you know i'm going to look at the
time do that if you can give me
say 45 minutes if you tell me at 45
minutes because i've kind of got it all
but i'm going to stop
unless i get close and i'm sort of at a
natural stopping point
um i'm going to keep going until you
tell me
uh the idea is that i'm going to go
through these concepts and then you guys
will have a break and i'm going to send
an email with you know the reading that
i want you to do and
what i want you to do is to go away and
use the resources that i send through
and
just take your time i'm going to cover
these topics
in a general in a general type of way to
give you an understanding and context
and then
i want you to spend the time to actually
read
um the paragraphs or the page on each of
them and then i want you to take some
notes
of key points that are that you think
are important
in what you're reading now i can go
through all of those key points but i
think it's
way too much information and that you
need your own time
and space to to go through the specifics
but what i want to do now
is start off with talking about um
you know payroll and and how payroll
fits into the
overall um you know business landscape
so first and foremost we've got the
different business structures
right so you've got your um pty
companies which uh usually private
and you've got your um limited companies
which are public
um then there's there's trust there's
sole trader ships and there's
partnerships they're kind of the
the main ones right and each of these
entities
are able to employ another person now
for now i'm not going to talk about
subcontractors
i'm only going to talk about actual
employees
before i start going through the payroll
concepts and you know showing you some
things i'm going to share the screen in
a minute
so i'm going to talk to you about how
payroll impacts the profit and loss
and the balance sheet so that you just
get an idea of you know what we're
talking about you're running a business
you've suddenly got a lot of extra work
and you decide you're going to hire
somebody
right so you've been plugging along
doing your invoicing
paying for your expenses and now you're
going to hire somebody so there's
obviously a process to go through but
before you go through that process you
have to have a think about can you
afford this person
in terms of the p l all of their costs
both productive and unproductive
so there'll be time when you're paying
them that they're adding value there'll
be some time that
is spent in you know training and sort
of
unbillable time time where they're not
really um bringing
much into the balance into the p l
so this unbillable time every employee
depending on what um
what industry you're in will have a
certain amount of unbillable time
so in in your case and majority of the
people in our industry
depending on what lev what position
they're in um
you know we're looking at about between
80 and 90 percent of time
is going towards client work and then
between 20 and 10 percent is going
towards goodity time
right so now you're looking at you're
hiring a person and um
as i mentioned before in serbia you guys
talk about net
net is um and gross is brutal so we talk
in australia
in terms of gross remember when i said
in your p
l when we're talking about what it costs
you
so their whole gross salary um if they
let's i'm going to use a round figure
let's say that their salary is 50 000
a year their whole salary will appear in
the
in the profit and loss um including
you know the tax everything will sit
there because that's what it's costing
you as a business
it'll be divided by 12 if they're you
know we're talking a simple case they've
got a
salary you'll see their cost across the
12 months
and then underneath that you'll have
their superannuation
which is um the in in serbia that's the
pension
that's the amount that goes towards the
pension for when they retire
and then there are a host of other
payment uh payroll costs which we're
going to talk about later
so i don't want to bring in too much
detail maybe i'm going to step it
through
so we're talking about now what is the
cost um to hire somebody and that's
going to be in your profit and loss
so the part that goes into the balance
sheet is
the part that that we have to pay that
we're tracking
but it's actually going to different
places isn't going to the employee
we have um you know when we when we do
that um
50 000 pay divided by 12 that month
we will have superannuation which is the
pension
and we know that we're holding that
amount
in the balance sheet under
superannuation payable that is then
being paid out
to the relevant pension funds then
there's remember
we talked about the pay as you go which
was the amount of
income tax that we have to deduct from
that gross
salary from the brutal we're going to
deduct the
tax and then we're going to end up
paying the employee the
net pay right so really if i can get you
comfortable with net
and gross so that i can continue to just
use those terms
the income tax also sits in the balance
sheet
we collect it until it's time to
distribute it
to um the australian taxation office the
ato
right so we're using our balance sheet
for
a whole host of other things for example
when you hire an employee
they're going to be um allowed to have
some entitlements
um and and some kind of types of leave
and so we are accruing for that and
remember we talked about accruing we're
allowing for it now
so that we can pay it out later and
we're keeping that up in the balance
sheet as well
so we're we're accruing you know what do
they have for sick pay
well um we don't agree on the balance
sheet but annual leave
later on long service leave and i will
talk about each of those a bit more in
detail just so that you get an idea
of the structure of it and how it works
right so the moment that you decide to
hire
any business decides to hire an employee
there's a whole set of
legal obligations that need to happen
and part of our role
is to support our clients in making sure
that they're compliant and that we're
keeping track of everything
and that we're making all the payments
on the due dates on their behalf
and that we're making sure that the
employees are getting um everything that
they need to get and access to the
information they need
to get okay um so i'll just
touch on the type um okay so then when
when you when an employer is deciding to
hire
um they're going to put out an ad
usually seek.com
i don't know whether you guys have
access to that in serbia but there's a
whole host of
different platforms some people go
through recruiters
but you know they basically do a job
description and they say i need to hire
this
role um then they take in the interviews
and the process that you guys just went
through so then when they're hiring
somebody they need to decide
you know what type of employee will they
be
and this will depend on what industry it
is on the need
um so um there's a whole host
i'm going to just quickly say them part
of your activity will be to go through
and read in detail um what each of these
you know the definitions and there's not
a lot there um
it's it's really quite neat and tidy in
terms of
explaining what each role is but if i
was to go through it now
there's no benefit you're not going to
retain it so it's more that i want to
just cover what exists
right for now so there's a full-time
employee which is somebody who in
australia is 38 hours
per week as a part-time employee
part-time means that they have set
regular days and hours that they're
going to work um then we have casual
employees casual employees generally
don't know
when you're going to call them they they
are on call and they have some penalty
some
additional loadings and and rates to
cover for the fact that they're not a
full-time employee and they don't have
all the same benefits
um then there's things like fixed term
there's shift workers
um there's daily hire and weekly hire
employees
there's employees on probation which
means you've given somebody a job
but you haven't decided yet you're
testing them out to see whether they're
going to be able to stay
there's apprentices and trainees and
there's a whole host of things to know
about apprentices and trainees and that
will be
touched on later on um and out workers
so there's just a list of different
types the main ones that we
deal with the main ones that we come
across are full-time part-time and
casual
and the other ones are just there for
you to just read
and sort of commit to memory so you've
got that within your knowledge base so
these aren't words that you you've never
heard of before it's just about
becoming comfortable with the
terminology
and knowing where to go to read up on
things because
i want you to read through it and do
your little do your notes and your
points but i'm not expecting that you're
going to memorize all this
because what i'm going to do is point
you to the website where this
information
is and it's really about knowing where
it is how to read it getting comfortable
with that because
the information will always be there and
it'll always be the most up-to-date
so it's just really knowing that it
exists and that and having an awareness
about it and knowing where you can find
it that's really important
so um you know at the crux of it our
role
is in setting up these employees right
so we we start from um
sending them all the information that
they need to get set up properly and
then
for managing all of the payroll and all
of the obligations so now i'm going to
share my screen
you know here is an example of a client
who has employed a new employee you can
see
delena is that right
you can all say that great so here's an
example
um of you know me welcoming her so a big
welcome to censalva college from the
accounts team we look forward to working
with you
in preparation for our first fortnightly
pay on the second of february please
find the attached forms
for completion please email the
completed forms to accounts at your
earliest convenience and don't hesitate
to contact us if you have any queries
so we're starting at the new school the
principal is really nervous
one of the teachers that said that she
was going to start
has said that she changed her mind she's
worried because it's a new school
i know the principal's really nervous
and i know that this girl is also
nervous so i'm reading between the lines
and i'm trying to make her feel welcome
i'm trying to present a professional
team where she feels secure
and um you know obviously i'm the
treasurer here as well but regardless
just i'm doing my best to make her feel
that
you know she's she's working for a
company that isn't just starting and
it's all
being set up that actually there's you
know ryman reason and everything is
is going to work professionally for her
she responded really well she was very
quick
to give the information so you know the
message that we have in here
you know it's going to depend on what
the situation is but
there's you know usually four things
that we send um to every new employee
and
really what we're doing is we're sending
this information three of them are
statutory and
the um employment information form is
something that we're collecting
so that we can have all the information
that we need when we are about to set
them up in xero
um after we've after the first day or
two
i don't know how long it will take that
we go through
all of the concepts then we will go
through um the practical
and actually go through and do it and
then you'll have a chance to also undo
it so
you know here's an example of an
employee information form that we
create and we're always we put in the
logo
um and onboarding would usually do this
you know we're asking for all the
information that we need so that we can
efficiently
set them up in xero and we're not having
to go back and forward
um to get more information right the
next thing that
they'll need to fill out it's called a
tax file
number declaration they usually have
about 28 days from when they first start
to complete this form
um you don't need to re i'm going to
send you
um forward you this email just for you
to have a look at it and
and generally scan i don't need you to
go through and read all this and
memorize it it's more about becoming
comfortable and familiar with it and
knowing what it is
so in australia the moment you start
before you can start working you have to
register for a tax file number you guys
must have like a social security number
or something
and that number stays with you for the
rest of your life so same with
us here that's our tax file number and
we need to give our employer that number
and that is how the government can group
all of your earnings and can
basically make sure that you're paying
the right amount of tax and that you're
not cheating the tax system
um so you know this just basically goes
through all of the areas you don't have
to worry too much about this what's
important is that
the person completes the whole form um i
think this one's digital
so they have to enter in their number
they're the ones that are telling you
um what basis they're employed on you're
obviously looking and then when you're
i'll show you the
an example of a contract if you see a
discrepancy you would raise it
so if they've checked full time but you
actually see the contract and it says
part-time that's something that you
would raise
um they are telling us whether they're
residents for tax purposes
they're telling us if they're claiming
the tax-free threshold and i'll
i'll talk about that a bit later when i
tell you about the australian tax system
um we in australia there's a higher
education loan
um students that study can um leave
their
their student loans to pay later through
the tax system so
if they're telling you yes or no here
what you're using
or this information is basically being
filled in
in the accounting software and it's it's
determining then
how much tax needs to be withheld from
every single pay period automatically
they need to sign it um we don't we
don't have to fill this out anymore
because
if we're if they're in xero we can lodge
it immediately from xero
but we still get this information from
them
and you know it's our obligation to make
sure that they have this
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