How to avoid common payroll mistakes

Staff payment issues can lead to low morale and poor productivity, so it's important to do everything in your power to avoid these issues. So here's how to avoid common mistakes when it comes to paying your employees.

Maternity or paternity payments

It's too easy to forget the simple things. It's important to make sure you remember to track leave start and end dates!

Understand any tax exemptions

As an employer, it's necessary for you to understand tax exemptions as they may apply to certain pay components. If you have any tax questions or need help understanding tax implications in your specific situation, contact us and we'll help you out!


Make sure that your superannuation fund meets all the minimum insurance and benefit requirements.

Public holidays and holiday accruals

Be sure to factor in holidays and calculate what's owed at the end of employment for holidays accrued.

New joiners and leavers

Remember to ensure they are included in the system and that TFN Declarations are submitted and the correct start date and end dates are recorded.

Employee expenses

Sometimes these need to be shown as taxable allowances on an employee's PAYG payment summary.

Meet important deadlines

Tax payments and reporting to the appropriate government authority is important to get right. Book your appointment today and we'll get you headed in the right direction.

When is a contractor an employee?

You may chose to hire a contractor instead of hiring an employee but in some circumstances they may actually need to be treated as an employee. There are a number of tests that will determine whether they are a contractor or an employee.

Involve your staff in payroll decisions

As much as your employees may love working for you, it's unlikely they'd do so if they weren't being paid! Regular timely payment is important to your staff.

Small businesses have the luxury of being flexible enough to accommodate their employees' payroll requests. For example, some companies pay employees fortnightly and others may pay on a monthly basis. This often gives staff greater control over their bill payments and expenses.

Even changing the monthly payment date could make all the difference to your employees. Involving your staff in these decisions will make them feel more valued. And having staff that feel valued is proven to enhance productivity and reduce staff turnover.

Understand tax rates and employee entitlements

Tax rates and entitlements vary from one employee to the next and can change for a wide variety of reasons. Award rates of pay, marginal rates of tax, and tax brackets, annual leave and sick leave accruals, superannuation entitlements and more complex items like salary sacrifices, fringe benefits and allowances all need to be considered and it can be easy to make a mistake if you don't understand the basics so be sure to contact us for help!

Handle errors with common sense and compassion

Mistakes happen. If you notice an overpayment or underpayment, don't just go ahead and take action. Instead, discuss it with the staff member concerned. If you take an overpayment back in one go, it could cause financial hardship for your employee.

Even it if doesn't, it sure won't improve their morale.

If you take back smaller amounts stretched over several months, it's likely to work out better for them and your business.

Check the government websites

The ATO has an extensive range of information specifically for small businesses and their payroll needs which can be found here.

Fair Work Australia also have all the respective rates and minimum employment conditions, that must be provided to all Australian workers, available on their website. They also have details on maternity/paternity leave entitlements so make use of the information available.

Get Advice

If you are unsure when setting up your payroll or making changes to it, it's probably best you seek professional advice.

Get your Lockwood and Ward accountant to check over it for you because if you get it wrong, it can be a painful and costly exercise to find an error and then correct it, especially if it has gone unnoticed for a long period of time.

As an employer you have a legal responsibility to pay your employees the right amount and to withhold the right amount of tax as well as calculate and pay the correct amount of super. If you require help with this, we can assist you. Just contact us on 02 9299 7044 or at

Have backup systems in place for added security

It's a good idea to have a backup plan and ensure that more than one person in your organisation knows how to run the payroll. You never know when the payroll processor will be unable to the vital job!

Also make sure to have a second bank account available to pay your employees in case your main account isn't accessible for one or more reasons. And in the unlikely situation that internet banking is down, we advise that you have telephone banking details handy.

Don't forget the importance of ensuring the privacy of your employees' personal details. A breach of their private information would not be received well so ensure their information is stored securely.

Payroll is important not only from a financial point of view, but it directly affects your employees so it's essential to make sure that you avoid payroll mishaps and keep your employees satisfied. If you are setting up your payroll system or planning on making changes to it, contact us for advice on 02 9299 7044.

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