Smart new online technology is having a major impact on payroll delivery. Owner managers can now fully integrate payroll into business management; and paydays have become much more simplified. Glenn Baker reports.
Most of us can remember our very first paycheck. Mine, delivered by the pay clerk, was a small brown envelope filled with crisp new notes (all $18 worth for two weeks work, and some cents) and a payslip stating the hours I’d worked, the rate, tax paid, and the amount enclosed.
I can still smell that money and remember the excitement of receiving it.
I also remember that sense of disappointment some years later when the cold, hard cash was replaced by a direct credit bankslip. I really missed not handling the real stuff (in fact, today I’ve forgotten what the real stuff even looks like!)
Paychecks date back prior to 1000 AD and are thought to have been first used by merchants in the Eastern Mediterranean. Known as “saak”, they were similar to modern-day paychecks in that they were documents with written instruction to the bank to make payment to the payee.
Fast-forward a thousand or so years and the process of paying employees has become a far more sophisticated, but much less time-consuming, process for business owners. And like most things, we have technology to thank for it.
While those ancient merchants looked to the clouds for signs of rain, today’s owner managers are looking to a very different ‘cloud’ for the delivery of a smarter, effective, more responsive and less expensive payroll solution – and that’s exactly what they’re getting. And pretty much all the payroll service providers have now leapt upon the cloud-based (read online) bandwagon.
Despite this, Datacom’s business manager Chris Mar reminds us that there is still a surprising number of businesses using manual records and spreadsheets to run their payroll – which can get complicated when you consider that they are bound by law to store this information for up to seven years.
“Payroll data is highly confidential and yet in many cases this information is held insecurely in a filing cabinet or a shared computer. Selecting a trusted cloud payroll provider to move this data out of the office and off a dedicated computer into a secure data centre is vital,” he says.
It’s no secret that the payroll marketplace in New Zealand is extremely competitive. Business owners have a wide range of service providers to choose from and a good deal of research needs to be undertaken in order to select the service that is the right match. And there’s likely to be more than one.
“Payroll is such an important process to any business that using proven and reliable software is paramount,” says Catie Cotcher, GM, Reckon. “Deciphering reliable solutions from newer, unproven offerings is made challenging with the sheer amount of solutions available in the market. However, an established history of development is a good indicator for a steadfast supplier, and is, I believe, the only trustworthy way to predict what the future may hold with any given supplier.”
Payroll legislation is also vastly complex, adds Cotcher, whose company completely rebranded its solution range from QuickBooks to Reckon Accounts in 2013. “And therefore payroll systems need to be highly configurable and flexible to be of value to business.
“Furthermore, a payroll solution is only effective if it can cover the core functionality required for the business; many of the newer more ‘lite’ offerings may not do this to the level desired.
“As with anything, it pays to do your research on offerings, to ensure the solution you are considering has all the features you need,” she says.
In recent times there’s been a change in the way businesses approach payroll systems, believes MYOB NZ executive director Scott Gardiner. “Traditionally businesses have approached payroll and payroll systems as an issue of compliance. As legislation around payroll, holidays and other tax obligations have become increasingly complex, business owners have looked for ways to not only meet their obligations more effectively, but also simplify payroll management.”
Gardiner says payroll systems have done a great job of taking the often challenging and ever-changing rules and making them easier for businesses to manage.
“Increasingly, though, we are seeing business owners wanting to make payroll a fully integrated aspect of their business management. This reflects how important it is for businesses to understand the linkage between their staff costs and their operation.
“If, for example, you want to have your staff costing right down to the last cent or assign staff costs to jobs, you need a system that ensures your accounting and your payroll work closely together.”
To use payroll as an effective business management tool, you want a system you can trust to give you the information you need, he adds. “For that, you need to go with a payroll provider you know has the experience, and constant commitment to development, to translate the rules for you. And a system that makes it simple to process and understand.”
Year after year the biggest payroll challenge for business owners is “getting it right” – this according to Kelvin Chen, MD of Crystal Payroll. “This is especially so in terms of record-keeping for leave entitlements. This is the area where the most damage can be done if calculations – and ongoing management – are not ‘spot-on’. It can be a complex area and it’s vital that business owners understand how this works.”
Chen recommends talking to your payroll provider. “Ask questions; get your accruals right first time and save the hassle of having to fix a leave issue when an employee decides to challenge your calculations.”
Looking to 2014 and beyond, NZBusiness asked commentators if there were any legislative initiatives coming up that would impact on payroll management. MYOB’s Gardiner says there will only be a few minor changes – however, these changes, which include a new adjustment to the ACC levies, emphasise the importance of using an up-to-date payroll system.
Beyond 2014, one of the most important trends in payroll is around the interface with government, says Gardiner. As part of the government’s focus on providing better public services for businesses, there is an increasing emphasis on a more seamless engagement with payroll and payroll providers.
“To reduce paper-work, the government is looking to provide a uniformed, digital entry into their system. As they look to do this, the expectation is that businesses will be using payroll systems or working with a payroll provider.
“This will be of real benefit to businesses, reducing the range of compliance requirements, and making it easier and more efficient, and hopefully faster, to engage with government around payroll. But it is also likely to ultimately mean all businesses will need to use some form of payroll system.”
iPayroll MD Martin Gleeson believes this government project will potentially revolutionise the way we all engage with the IRD. “But once again cloud-based services such as ours will provide a buffer for clients in these circumstances, as we are the intermediary between the client and the IRD.”
Cloud-based and loving it
It’s safe to say that cloud-based payroll systems have become the ‘new normal’ for business owners, and here, functionality towards a customer’s needs is the key. Nobody knows this more than Kelvin Chen. Crystal Payroll was building an online payroll system as far back as 2003.
“We work hard on remaining flexible and regularly enhance our system’s functionality based on customer feedback.
“We also think it should be easy to make the switch to online from older PC-based systems. Crystal Payroll can transparently migrate every scrap of important payroll information you need, especially leave entitlements, accrual and balances, from a range of supplier systems,” he says.
There’s no doubting the real advantages cloud-based systems offer businesses; not least of which is accessibility via the Internet – ideal for owners who run pays outside of working hours and/or away from the office. There’re also the advantages of always having the latest compliant system, updates deployed quickly, and the opportunity to access an integrated system that provides both accounting and payroll services from a single provider.
Look for cloud-based systems designed with simplicity and ease-of-use as a core focus, advises MYOB’s Gardiner, and look closely at pricing.
“In particular, you want to understand whether you’ll be paying for add-on solutions for your accounting and your payroll, and if you have to pay more as you grow to have additional staff members.”
Reckon’s Cotcher advises cloud adopters to ensure the software is deploy proven, reliable and New Zealand developed. “Payroll legislation is country-specific, and highly complex, so deploying software built for another market is not going to work.”
Following client feedback, her ‘must have’s’ in any payroll solution include scheduled payments and emailing payslips to employees; being able to split payments to multiple bank accounts; and strong Kiwisaver functionality.
‘Nice-to-have’s’ include the ability to perform functions such as entering time for all employees from a single window. “Potentially as important as the actual features is that the software must easily perform these payroll tasks.”
IMS Payroll’s Patrick Hegerty’s advice is to not stop at just putting payroll on the cloud, consider putting your timesheets and leave application systems there too. “For most businesses most of these are paper based and there are huge benefits to be gained each pay period by putting these online.”
IMS Payroll recently introduced Android and Apple IOS Apps for its IMS Online Timesheets and Leave Application systems. “We know that many people do not spend all day sitting on a PC. However, most people do own smartphones and it is the most logical, convenient method of data collection.”
PayGlobal is another provider hedging its bets on the cloud as the way of the future. A large number of its customers have already switched to its online services.
“The advantages PayGlobal Online Services provide now extend beyond relieving traditional IT concerns, such as disaster recovery and cyclical reinvestment in hardware and licensing,” says PayGlobal’s head of service delivery, Warwick Hutchins. “We can now leverage the cloud model to provide improved day-to-day services and easily roll out great new features such as our new PayGlobal GO iPhone app.”
Warwick adds: “Delivering functionality from the cloud allows us to provide greater value and improved services to our customers which in turn will drive PayGlobal’s continued cloud adoption.”
Meanwhile, iPayroll’s Martin Gleeson has noticed more large organisations opting for cloud-based payroll systems, which reinforces the ‘new normal’ argument. Cloud solutions not only take away the compliance pain points for businesses he says, they also negate the traditional pain points of offline solutions.
But he also sounds a warning. “There are a number of cloud-based systems out there but some are quite modest in the functions they provide and tend to be ‘low spec, low price’.
“While this suits some (businesses), for not much more money, usually the price of a cup of coffee a week, they could get so much more bang for their buck.”
What to look for
So what are the absolute musts in a payroll system? Scott Gardiner believes there are three key considerations:
• Does it provide everything you need from a compliance perspective?
• Is it easy to use and understand; does if give you the information you need without unnecessary complexity?
• Does it provide the level of integration and support you expect from your provider?
PayGlobal product manager Van Boheemen says a payroll system must be cloud based, future-proofed and reliable. “You need a solution that’s going to pay your employees correctly every time. It should be a cost-effective solution with proven ROI and ideally include must-have features such as mobility, automated award interpretation, self-service and business intelligence.
‘Simple’ and ‘low cost’ are also words chosen by Datacom’s Chris Mar to describe the ideal payroll system. “And selecting a provider that also provides PAYE Intermediary services means that you won’t have to worry about dealing with the Inland Revenue again for PAYE returns and payments. This allows you more time to concentrate on your business and eliminates the risk of costly penalties.”
Also, ask questions about where your data is hosted and what plans they have in case of a disaster, says Mar. “A cloud provider should be able to provide evidence of their disaster recovery strategy and regular tests that they perform. They should have redundant servers in different locations so that if one location was affected, they can easily switch to another location.”
Cloud payroll provides freedom
Established in 2009, Deco NZ provides professional painting services in Canterbury and is currently seeing substantial growth in a wide range of rebuild projects. Owner John Garvey says MYOB’s AccountRight Live system enables them to always have up-to-date information.
“The other fantastic use we’ve found is that the MYOB Payroll is now talking with our accounting system extremely well,” says Garvey. “Every hour of every job gets allocated to that job, which means those labour costs get directly attributed to those projects. That information transports through the accounting system and I can run a profit and loss account on a particular job, to know exactly how much profit has been made. The back-costing system is just phenomenal.”
Co-owner Emma Garvey says one of the key attractions of moving to the cloud was the different user access. “Our growing business needed more people in the office. With moving to the cloud we can have everyone on the system at the same time.”
Emma says the anytime, anywhere access of the cloud also allows them more freedom to enjoy time away from the office.
“John and I go away on a family holiday every January, which leaves the business without us in the office for the accounting and payroll. Using the cloud and with our office support, we’ve been able to log in and do the final pieces remotely. That’s a huge benefit to the business because everything’s going smoothly and the bosses are benefitting from a bit of a break!”
Payroll stars at iconic cinema
When Miramar’s iconic Roxy Cinema went looking for a new payroll system, it required one that would integrate seamlessly with Xero, and a system based in the cloud that could safely store payroll data off-site.
It was important for the cinema to have its managers on the floor talking to customers and so less hours in the office are essential, says cinema GM Cesar Breton.
“The plan was to use accounting and payroll packages that were quick to use, user friendly, online and enabled multiple owners access to reports and up-to-date information.
“iPayroll enables that approach to business by ensuring that payroll is taken care of and that any time reports can be easily accessed. With up to 30 pays each week, it saves time and valuable resources.
“Importantly for us, iPayroll works well with the Xero accounting package we use,” adds Breton. “It also provides useful alerts for special holiday pay considerations that a non-expert may overlook. I have used iPayroll for several years now and find it reliable and very easy to use and recommend it to any operator who wants to be on the shop floor rather than in the office!”
Breton likes the fact that iPayroll files the PAYE returns for their 30-plus staff, which is another time saver, and switching over was an easy process. He says the ever-changing tax rules can eat up a lot of time, but “all that is taken away by iPayroll, resulting in quantifiable improvements in administrative costs.”
Making up time
Ten minutes a day per employee was FlexiTime’s goal for labour cost savings when developing Shift, a photo time clock app for the iPad.
FlexiTime founder Robert Owen believes that by using the photo time clock with FlexiTime’s powerful rostering and payroll applications businesses can save thousands of dollars each year. “We’re seeing even better savings when administration costs, payroll errors and staff fraud reductions are taken into account,” he says.
Shift takes a photo of the employee when they clock in for work and then displays photos of all staff currently clocked in. Online integration with FlexiTime rosters means Shift can also show who is rostered on and should be working, but hasn’t clocked in.
“When we talked with business owners about rostering, the concerns we heard were around paying staff outside their rostered shift times – staff turning up too early or having a drink after work while still on the clock. We’ve solved those problems.”
The rostering and time clock system integrates with FlexiTime Payroll, a fully compliant online payroll application. Time recorded in Shift is automatically used to create pay, eliminating the need to collect and enter pay hours from paper-based time slips.
FlexiTime is one of a new breed of online software tools bringing innovation to traditional business areas such as payroll, point of sale and accounting. Owen says that the success of add-on partner Xero has helped with an acceptance of business applications in the cloud.
“We wanted to make payroll better. It shouldn’t need to be something a business has to outsource, or have a dedicated payroll person doing. Once the time has been used for rostering staff and then confirmed by time clock, payroll should be a simple ten minute task,” he says.