Payroll – it’s (no longer) complicated

It seems the world is full of experts who’ll tell you how and why business enterprises fail. But success is a different matter. It’s that sort of world. They forget that virtually every global conglomerate today started small.

One of the best indicators that your SME (small or medium enterprise) is on the upward trajectory is that you suddenly realise you need a payroll system.

Your time as the owner manager is better utilised elsewhere and the issue is too important – errors in an employee’s take-home pay or the leave component are one of the quickest ways to lose a critical resource.

Fortunately, the New Zealand payroll system solutions market has none of the horror stories of the benighted financial institutions to intimidate you. But making the right choice for you, the business, and current (and future) employees might not be the easiest to make. Simply because of the vast choice of quality offerings.

Here’s a short-list of what to consider as you enter your important selection process:

• Be cautious about a supplier which recently entered the market.
• Select a payroll solution offering more functionality than you need – you are going to grow, that’s why you are doing this.
• Is it configurable? No two businesses are identical. It is important to be able to configure the system and turn on/off required functionality.
• If integration with your time-and-attendance/roster systems and your existing financial management systems is key – as it likely will be – ensure the payroll software you choose has the ability to cope fully with them.
• How self-service-friendly/easy-to-use is the system for you and your employees?
• Desktop or cloud-based? Unless you have a solid IT background and are up with the play, you might consider a supplier offering both. If you go ‘cloud only’, make sure you can access your data should you sever your relationship with that service.
• Mobile communications have arrived. If your current employees aren’t asking, your next ones will expect to be able to send and receive employment-related information via mobile apps.
• Get proof your supplier is able to adapt quickly to the fairly constant flow of new legislation governing this aspect of the business.

NZBusiness spoke to a number of payroll solution providers to assist business owners in developing an appropriate short-list of vendors to interview. These included IMS Payroll Cloud Service; MYOB; iPayroll; Crystal Payroll; Datacom; and Reckon.

Most of these would add their own unique advantage to their offering or a capability their research tells them resonates with customers.

Take MYOB, for example. “Being ‘right-sized’ for your business,” says Scott Gardiner, NZ sales manager – Business Division, “is the model we have used for MYOB Essentials, which we believe fits the lifecycle of most businesses. Typically, we see businesses start with accounting to manage cash, then becoming more sophisticated as they add invoicing. Then, when they employ staff, they look to introduce a payroll system. With our package, all these features are available in the one system.

“Later, for more complex payroll and time billing, MYOB AccountRight is bundled with MYOB Payroll, so you can meet all your obligations as an employer, while ensuring your business is capturing the time component of your employees’ work.

“For any employer, particularly one new to running a business, payroll can be one of the most challenging areas of compliance. As the raft of legislation an employer must be aware of has become increasingly complex and the range of other contributions collected from employees, such as KiwiSaver, student loans and child support, has expanded, it has become nearly impossible to meet compliance obligations without some form of payroll assistance,” says Gardiner.

“In response, the focus of payroll systems and software has been to create greater simplicity, while providing far more visibility for the employer. Fully integrated payroll systems now form a vital part of a business’ management suite, offering up-to-the-minute data on staffing costs and entitlements as part of a global picture of the business.”

MYOB therefore believes payroll is “only part of the story” when managing employees.

“You have to manage a wide spectrum of employment issues, from recruitment and contracts to personal development and disciplinary action. There we partner with specialist HR software, MyHR. Other add-ons include Tanda, which extends the system to offer rostering and time clocks.

“Health and safety is another significant issue in employment, with the Government due to introduce major reforms in 2015. To help employers understand their obligations and responsibilities as employers, we provide regular updates, courses and advice in our free online employment portal,” says Gardiner.

Payroll managers get it easier

“Our philosophy is to make life easier for payroll managers,” says IMS Payroll’s Patrick Hegarty. “That means our range of Employee Self-Service Products is really delivering on this philosophy, as employees can request leave and submit timesheets, view leave balances and leave calendars to see when leave was taken, access payslips, access employment related documents, such as contracts and tax certificates, as well as view employee data and notify the administrator of changes.

“At the same time an owner manager can do all of the above, as well as approve leave and timesheets and run KPI reports.

“This vital functionality means employees and management serve themselves, significantly reducing the number of requests for information coming to the payroll manager.”

One of their major features in IMS Payroll’s
2015 Enhancements’ is “the improved handling of parental leave”.

“This is a leave-type needed by all businesses, large or small,” says Hegarty. “The legislation is relatively complex and most other payroll products handle it poorly if at all. Our enhancements this year have automated the process associated with employees going on parental leave and the calculations for annual leave rates when they return.

A change currently in the wind with the IRD is the taxing of holiday pay on termination, he says. “Holiday pay, on termination, would be taxed as ‘extra pay’, effectively doing away with the ‘number of weeks’ for tax calculation purposes. [This is currently before the Office of the Chief Tax Counsel and a legal opinion is being prepared.]

“In preparation for this being confirmed, we have unlocked the ‘tax type’ option on our ‘annual leave not taken’ and ‘holiday pay owing’ payments. This means clients will be able to change the ‘tax type’, if and when required.

“We are advising clients to refer to the Notice Board on our website for updates.”

iPayroll managing director and founder Martin Gleeson has his own ideas on the key factors business owners should look for when selecting an online payroll provider – not least of which is a proven track record.

iPayroll’s premier cloud payroll service was established back in 2001 and has a solid track record of delivering to its many thousands of customers for well over a decade.

Says Gleeson, “We provide an easy-to-use, trusted payroll package; a self-managed cloud service, very popular with SMEs moving online for the first time because it’s as simple to use as Internet banking.” Businesses enjoy the functionally of the feature-rich service normally associated with much larger and more traditional systems, he says.

“It keeps your records, does your banking and pays your staff, PAYE and KiwiSaver all in one go. Our medium-to-larger clients choose us because there are many features they use and want which are part of our service, yet not supplied by all payroll services or packages.”

iPayroll’s latest offering, rolled out in June 2014, is even more user-friendly, Gleeson believes, with visually appealing graphics and new features for clients. Clients continue to enthuse over the simple four-step process for running their payroll, he says, while finding the program even more intuitive to use through the added features and greater processing power.

“Employees will notice changes to the Employee Payslip Kiosk which already has the leave request feature enabled and enhanced security features and usability; including the ability for employees to reset their own password.

“These days, when everybody seems to have smartphones, being able to access their own payslips in the cloud, 24/7, seems to appeal to most employees. It also shows deductions like KiwiSaver and PAYE. Clients tell us the Kiosk makes it much easier to manage leave online – for both employees applying for it and managers approving it.

“Clients who migrate from a paper-based or desktop payroll system are always impressed by the benefits of going online,” Gleeson adds. “They wonder why they waited so long to do it, given they can access their information anywhere/ anytime through a secure system – and integrate seamlessly with most popular accounting systems, including Xero.”

Gleeson is at pains to emphasise iPayroll’s commitment to thoroughly train those who use their system. “When you call our free help desk you’ll talk to someone who understands payroll. Our approach is that there’s no such thing as a silly question. If you’re not sure what to do, you just have to ask. It’s good old fashioned service in today’s modern digital age.”

The mobile payroll space

When it comes to mobile payroll space, one of the leading players in New Zealand is Datacom.

Datacom Payroll marketing executive Justin Cheong reckons that while mobile phone screen sizes don’t really lend themselves to displaying lots of data very well, tablets are a great compromise. They’re portable and mobile, but still easy-to-use.

“We’ve recognised that using your smartphone to authorise payments or having a quick and easy way to enter in hours for your staff when you’re on the run is important. We’re working towards that.”

In fact, Datacom Payroll has already established a presence in the mobile space with the introduction of MyPay. It’s available as part of their enterprise payroll solution and allows employees access to see when their next pay is due, view their payslips, view personal information and leave balances – all 24/7.

Cheong points out Datacom has been at the forefront of the change to ‘software-as-a-service’ over the past decade.

“Not all cloud providers are created equal. You will need to consider the differences in your evaluation. Look for a dependable provider with a proven track record with New Zealand business. Ask questions about where your data is hosted and what plans they have in case of a disaster.”

Your cloud application vendor should have sophisticated software on powerful servers in secure data centres, he says, and cover all of the maintenance and upgrades required.

“In essence,” Cheong says, “all you should need is a computer connected to the Internet. You simply pay a usage charge, based on what you use, and get a highly-scalable system without the capital outlay.

“Payroll calculations are in a constant state of change as a result of new legislation; a cloud based system such as Datacom Payroll will take care of tax and legislative updates automatically for business owners, giving you the peace of mind that each time you log in you are using the most updated version of the software. That’s most important.

“Datacom’s cloud applications are also connected into the banking network. This means when the application has calculated the payroll for your staff and you have approved it, all of the banking will happen automatically. This can save a lot of time and frustration.”

Some final tips

Before you look back at the checklist at the beginning of this article to see how what you’ve learnt so far measures up, here’re some useful additional tips from Kelvin Chen, MD of Crystal Payroll.

He sounds a caution on using the basic payroll systems some accounting software providers include in package deals. “Sure, it’s great to get this extra software for only a few dollars more (or possibly even for free) but there should be some real consideration given to its level of functionality.

“Will it actually do everything that your company’s employment situation may need? And, given that payroll is, by nature and by legislation, a complex activity (even many accountants struggle to understand), can you be certain this payroll-built-in software provider will be able to accurately interpret changes to legislation and update their system appropriately?”

Chen says another question to ask is, Can you easily transfer data in?

“Not all online payroll systems allow you to upload or transfer data from previous PC-based payroll systems, or will only allow current balances,” he says. “If you’re moving away from an off-line software system, you don’t need nor want to leave your important payroll history behind.”

Chen believes this is one of the biggest perceived barriers to people moving into cloud-based services. “They think they’re going to lose all their employees’ leave accruals and entitlements – or they’ll only be able to bring in balances. Most are genuinely delighted when they find that all of this data can be quickly and cleanly imported during
set-up with just a standard back-up file from their older PC-based system.”

So moving over to the cloud is not the massive hurdle many think it is, he says.

We’ve all heard the horror stories of dissatisfied customers dumping a provider, only to find they’ve lost all access to historic data. “We consider this damaging to the general perception of online services and entirely unnecessary,” says Chen. “We think it’s better that the account remains accessible on a read-only basis – even when a customer stops using our services (usually when their small business fails). Then they’re still able to access all their payroll information and extract any reports they need for as long as legislation requires. It just seems fairer and more reasonable.”

So negotiate that upfront and get it in writing is his advice.

Finally, ask what ‘support’ really means.

“Everyone offers ‘support’, but some support is for software assistance only,” says Chen. “Others actually offer payroll advice too. If it isn’t operated by an IRD accredited PAYE intermediary then its run by a software specialist – not a payroll specialist. Which would you prefer to deal with?

“Will they also be able to talk you through calculating the final entitlements of an employee you’ve just terminated for serious misconduct? Or answer any of the other complicated payroll questions you may have? In most cases they are not experts in payroll – just experts in their own software.”

Kevin Kevany is an Auckland-based freelance writer. Email [email protected]