Shifting the payroll parameters

Feb 02, 2010

Payroll issues continue to create headaches for many business owner-managers – but new methods of payroll delivery are providing some welcome relief. Glenn Baker reviews the payroll systems and services market.

Managing payroll functions for any size business can be a complex process, with a myriad of potentially confusing rules and regulations to contend with. And it can be a major challenge keeping up with new developments.

So choosing a payroll package and support provider that best suits the needs of your business is absolutely paramount. Get it wrong and your headache could quickly turn into a migraine!

‘Pain points’ or challenges for businesses, according to the industry experts, generally centre around holiday pay calculations, especially average earnings, KiwiSaver, record keeping – and generally getting the pay done accurately and on time.

“Our payroll seminars focusing on holidays and KiwiSaver are some of the most popular features of our education programme,” reports MYOB general manager Julian Smith. “Which highlights the number of Kiwi business owners that need support in managing this aspect of payroll.”

Payroll is often viewed as a necessary evil by business owners, says IMS Payroll general manager Patrick Hegarty. “Generally the attitude is the more quickly and efficiently the payroll can be processed, and at the least cost, the better.”

Payroll is not a company’s core business, he says, so the less you have to think about it, the better.

So what additional payroll compliance issues have raised their ugly heads in 2009 to test the mettle of your payroll person?

Hegarty says holiday pay continues to be an absolute minefield for businesses, and maintaining the necessary level of understanding can be an expensive process.

April 2009 saw more changes to rules relating to the KiwiSaver scheme, tax cuts, new Independent Earner tax credits, to name just a few. No major changes to the KiwiSaver scheme are scheduled for 2010 – however, there are likely to be significant increases to the ACC Earner levy which will impact PAYE.

2010 sees the introduction of a new charitable donation scheme, Payroll Giving, which allows employees to make voluntary donations to registered charities and claim an immediate tax credit at source. Hegarty says Payroll Giving is a major one for New Zealand’s registered charities – although it will be very much driven from their end. Applicable since January 6th, it is still the employer’s choice as to whether the facility is offered, he says.

There is also potential for changes to the Holidays Act at some stage during the year, says MYOB’s Smith. “A working group is due to report to the Minister with recommendations, so it’s likely that legislation will be introduced.”

Meanwhile, the whole issue of payroll compliance remains an ongoing issue for SMEs, says iPayroll’s managing director Martin Gleeson. “However these can be substantially mitigated using IRD-authorised and listed PAYE intermediaries.”

He says often the primary reason new clients give for moving from an in-house payroll system to a SaaS (Software-as-a-Service) or ‘cloud’ model is the benefit of not having to deal with the unrelenting monthly filing and payment requirements of the IRD. “With PAYE intermediaries handling all ‘back office’ functions on clients’ behalf these problems disappear.”

Online hosting

Of course, mention of the SaaS model brings us to one of the most significant trends in payroll software since payroll went electronic – the move to online hosting.

The fact is, an increasing number of payroll system and service providers are now offering an online hosted option for clients – if they’re not doing it already, they soon will be, because it makes sense on so many levels. However, there are a number of factors that must be taken into account.

Martin Gleeson has witnessed the move by larger organisations from in-house payroll to SaaS delivery – “joining the small organisations that have been flocking to SaaS services for years”. In fact iPayroll was one of the online delivery pioneers, having developed a pure SaaS model utilising the Internet as a delivery mechanism in 2000 and 2001.

“Larger organisations tend to be bigger users of HR functionality, such as reporting groups for training and development, OSH and the like. Other enhancements like ‘Employee Self Service’ for online leave services, traditionally the sphere of bigger industrial software, have also become more sought after by these larger organisations in the SaaS space,” says Gleeson. He says iPayroll’s Internet Employee Payslip Kiosk will address this space from April.

Gleeson believes that the term ‘cloud computing’ is now superceding that of ‘SaaS’. “The progress of Xero has accelerated this process, especially in the online accounting space.

“Integration with iPayroll and Xero, for example, with the Internet being the integration mechanism, is now a popular way for organisations to manage these two key areas of business management.”

Another payroll provider also giving clients an option to access their payroll functions online is IMS Payroll.

“The new online solutions combine the security and control of an in-house payroll system with the flexibility and availability of the Internet, says Patrick Hegarty. “It also offers security for employees’ payroll information and will save businesses time and money.”

Businesses will notice a significant decrease in time consuming queries concerning pay and leave, he adds. “Employees can access all pay related activity, including payslips and leave request forms, by logging onto a secure website with their own password.

“For employees it’s an efficient and safe way to review and file payslips and check leave entitlements – no more leaving payslips around the office and no more returned email payslips,” says Hegarty. Time slips can be entered online, he adds, plus end-of-year earning certificates are immediate and can be accessed by staff without causing hassles for admin people.

Easy, secure access is a common theme amongst the online payroll service providers. MYOB’s MyStaffInfo, as another example, allows payroll professionals, managers and employees to view and manage their information.

“Employees can view their pay history and make leave requests, managers can make approvals and payroll professionals can import information into their payroll systems,” says Julian Smith. He says it is designed to make many of the processes around payroll easier and more efficient – eliminating the need for paper-based administration of common payroll tasks, keeping a record of processes and allowing employees to view relevant information without having to request it from their manager or payroll department.

Decisions, decisions

It’s generally regarded that online payroll solutions are providing most of the growth in the payroll services market – but that’s not to say that DIY desktop solutions can’t still be cost effective and work just fine – provided you can drive it properly, you have the technology and a proper backup procedure in place. But the online option, while still requiring a certain level of competency and understanding at the business end, is compelling. You may initially have an issue over data security, but you’ll soon get over those fears and appreciate the many benefits – such as automatic interfacing with banking systems and the IRD, automatic software updates, which means you’re always utilising the latest version, ‘anywhere’ access, and so on.

Whether you opt for DIY, an outsourced specialist bureau payroll service or a hosted online service – the platform you choose should specifically match your business’s needs, and you should be comfortable with the level of control you have over data. If you’re considering online delivery – make sure you have a reliable broadband connection in your area.

In the end you may opt for a hybrid of desktop (installed) and online delivery – but the first decision, of course, is to decide whether it is indeed time for an upgrade.

Upgrading payroll systems can quite often mean just stepping up to a bigger version – many vendors offer solutions that can take customers from entry-level right up to enterprise. Upgrading can also mean switching vendors, which can be more problematic, but in the long-run more beneficial to your business.

What are some of the tell-tale signs that it’s time to upgrade? Perhaps you’re having difficulty keeping up with IRD compliance and being stung by fees for late filings. Or perhaps you’ve moved from sole trader and you’ve hired staff. Going from manual to automated payroll, or moving from in-house to online delivery could be the best move you ever made.

Looking ahead

Whatever you decide, as indicated earlier, the online payroll market will continue to march forward at speed. As iPayroll’s Martin Gleeson points out, hybrid systems will continue to emerge. “Some in-house packages now offer front-end services hosted online to meet the challenges laid down by SaaS solutions.”

As well as accessing data and running payrolls from PCs and Macs, mobile devices will also become more utilised in this space, he says, with payslips already being accessed from mobile phones.

MYOB’s Julian Smith sees payroll services and software being shaped by increasingly connected applications – with a blurring of the lines between installed and online applications, as well as growing integration between solutions and other services such as banking and government agencies.

At the end of the day, your payroll system needn’t change dramatically as a business grows, according to Accredo general manager Tish Brindle. “It needs to be reliable and handle all the variations in staffing. If you don’t pay your staff correctly on time every time you have a major problem and if you get the tax payments wrong the IRD is a very unforgiving creditor.”


« Back to articles