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It’s time for businesses to be digitally ready for Single Touch Payroll (STP) and here’s how

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Payroll is a critical business function and now is the time for HR and Payroll managers to get ready for Single Touch Payroll (STP). STP compliance will be mandated from 1 July 2018 for “substantial businesses” (those with 20 or more employees as their headcount stands 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) in real-time (at the time of payment). This means these events now flow from payroll, and then on to the ATO via the automated STP process.

Under STP, once each pay run is completed, the data is packaged and sent to the ATO. Response messages are then sent back to the payroll console for attention by the employer. This is an end-to-end process that runs seamlessly and is useful to the user because it requires minimal human intervention or multiple data inputs and pathways.

Digitising the payroll process to enable STP

Because the changes to Australia’s payroll system impact how HR managers and payroll officers pay their staff, 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 yet automated their payroll system into a software-based solution, 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, and the only way to be compliant will be to migrate any manual or paper-based payroll processes to a digital solution.

Payroll software providers need to ensure that their software is updated to address the functionality requirements and compliance obligations under STP, or risk non-compliance and customer churn. Similarly, businesses using existing payroll software solutions need to be aware of these changes and ensure that they ask the right questions of their software provider to make sure that their software provider’s solution is STP-compliant.

Overcoming challenges to outdated payroll systems

Today, payroll plays a mission-critical role that includes both paying employees correctly, and acting as a feeder to other stakeholders across various lines of business.

There are inherent challenges when it comes to running a payroll efficiently – these include 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. This can lead to data required by business stakeholders becoming trapped inside the payroll – meaning the payroll administrator must manually access and distribute that data. This can be a time-intensive process and can have a snowball effect, causing delays, errors and frustration by employees expecting their pay to be in their bank account on time.

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 that integrates with online accounting and HR platforms – covering areas such as employee self-service, onboarding, offboarding, performance management and remuneration systems – makes it much simpler to analyse and distribute data more seamlessly. The ubiquity of the internet also means the payroll system can be accessed anywhere and at any time.

Investing in an STP-friendly cloud payroll system

When it comes to investing in a best-fit payroll system, business owners and HR managers should be looking for advanced technology software solutions hosted in a premium, cloud-based facility governed by a high degree of security, redundancy and reliability. A payroll system that features an API also makes connecting to external systems such as rostering, and time and attendance much easier to achieve.

To help businesses and HR managers get STP-ready, here are six quick tips to get you started:

Do your headcount

Remember that the 1 July 2018 effective date applies to “substantial employers” – which is those businesses with 20 or more employees, as at 1 April 2018. Be aware though that there are certain exclusions from the count so refer to the ATO website for details.

Know your STP requirements

What documents do you need share with the ATO and when (for example, employee superannuation and taxation)? Have you checked whether your payee records and payee payment information are correct? If not, update these now.

Check that your payroll system is STP-compliant

Contact your payroll provider to determine if it is and what support they offer. If it’s clear that it won’t be compliant by 1 July 2018, you may need to apply to the ATO to defer your start date, or investigate alternative software options that will be STP compliant from 1 July 2018, such as ELMO Cloud HR & Payroll.

Communicate changes to all staff

Ensure all employees understand the changes to the payroll system and how this may impact them. It is also a good idea to get your employees to register on the myGov website because annual payment summaries and other information will appear in that portal.

Top up your team training

HR teams, payroll officers and other stakeholders (which may include your organisation’s employees) who use payroll will need appropriate training on navigating the new STP system – a service that should be provided by any credible cloud payroll provider.

Migrate to digital

Research tells us 51 per cent of businesses have been in the process of redesigning their digital business models, with a similar percentage planning to leverage digital and mobile tools to improve HR processes. These tools extend and connect to the entire employee lifecycle and include integrated and automated recruitment, performance management, learning, wellness, feedback, employee engagement, compliance, and payroll.

To ensure your business is STP-ready, the ATO has prepared a “Get Ready Checklist” as a guide to help eligible employers ensure they meet their obligations with minimal fuss.

Danny Lessem, CEO of ELMO Software Limited, is an expert on integrated cloud-based HR and payroll. Established in 2002, ELMO is a cloud-based HR & Payroll software provider. The company offers customers a unified platform to streamline processes for employee administration, recruitment, onboarding, learning, performance, remuneration, compliance training and payroll. ELMO operates on a Software as a Service (“SaaS”) business model based on recurrent subscription revenues.

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