Student Workbook BSBFIA302 Process payroll 1 st Edition 2015 Part of a suite of support materials for the BSB Business Services Training Package
Acknowledgement Innovation and Business Industry Skills Council (IBSA) would like to acknowledge SkillSmart for their assistance with the development of the original resource for BSBFIA302A. BSBFIA302A writer: Janene Piip and Margaret Granger BSBFIA302A industry reviewer: Leo Gaggl, Brightcookie.com Revised for BSBFIA302 by IBSA (2015) Copyright and Trade Mark Statement 2015 Innovation and Business Industry Skills Council Ltd All rights reserved. Apart from any use permitted under the Copyright Act 1968, no part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, or otherwise, without written permission from the publisher, Innovation and Business Industry Skills Council Ltd ( IBSA ). Use of this work for purposes other than those indicated above, requires the prior written permission of IBSA. Requests should be addressed to Products and Services Manager, IBSA, Level 11, 176 Wellington Pde, East Melbourne VIC 3002 or email sales@ibsa.org.au. Innovation and Business Skills Australia, IBSA and the IBSA logo are trademarks of IBSA. Disclaimer Care has been taken in the preparation of the material in this document, but, to the extent permitted by law, IBSA and the original developer do not warrant that any licensing or registration requirements specified in this document are either complete or up-to-date for your State or Territory or that the information contained in this document is error-free or fit for any particular purpose. To the extent permitted by law, IBSA and the original developer do not accept any liability for any damage or loss (including loss of profits, loss of revenue, indirect and consequential loss) incurred by any person as a result of relying on the information contained in this document. The information is provided on the basis that all persons accessing the information contained in this document undertake responsibility for assessing the relevance and accuracy of its content. If this information appears online, no responsibility is taken for any information or services which may appear on any linked websites, or other linked information sources, that are not controlled by IBSA. Use of versions of this document made available online or in other electronic formats is subject to the applicable terms of use. To the extent permitted by law, all implied terms are excluded from the arrangement under which this document is purchased from IBSA, and, if any term or condition that cannot lawfully be excluded is implied by law into, or deemed to apply to, that arrangement, then the liability of IBSA, and the purchaser s sole remedy, for a breach of the term or condition is limited, at IBSA s option, to any one of the following, as applicable: (a) if the breach relates to goods: (i) repairing; (ii) replacing; or (iii) paying the cost of repairing or replacing, the goods; or (b) if the breach relates to services: (i) re-supplying; or (ii) paying the cost of re-supplying, the services. Published by: Innovation and Business Industry Skills Council Ltd Level 11 176 Wellington Pde East Melbourne VIC 3002 Phone: +61 3 9815 7000 Fax: +61 3 9815 7001 Email: reception@ibsa.org.au www.ibsa.org.au ISBN: 978-1-925379-04-4 Stock code: BSBFIA3021W First published: July 2015 1 st edition version: 1 Release date: July 2015
Table of contents Introduction...1 Features of the training program...1 Structure of the training program...1 Recommended software...1 Recommended reading...2 Section 1 Record Payroll Data...3 What skills will you need?...3 Enter payroll details from source documents...4 Employee awards and entitlements... 13 Payroll details in MYOB... 18 Generating reports in MYOB... 26 Timesheets... 29 Calculate payments to employees... 35 Check payroll data with designated person... 40 Section summary... 41 Further reading... 41 Section checklist... 41 Section 2 Prepare Payroll... 42 What skills will you need?... 42 The twelve steps of the payroll process... 42 Produce and store secure payroll records... 62 Payroll security control measures... 79 Section summary... 82 Further reading... 82 Section Checklist... 82 Section 3 Handle Payroll Enquiries... 83 What skills will you need?... 83 Respond to payroll enquiries... 83 Communicate effectively... 86 Comply with legislation and company policy... 87 Refer enquiries to designated person... 90 Access information... 92 Ensure enquiries are followed-up promptly... 93 Section summary... 95 Further reading... 95 Section checklist... 95
Glossary... 96 Appendices... 99 Appendix 1: Payroll data templates... 99 Appendix 2: ATO forms... 111 Appendix 3: MYOB... 113 Appendix 4: Assistance with selected learning activities... 121 Appendix 5: Green s Hardware policies and procedures... 137
Student Workbook Introduction Introduction Features of the training program The key features of this program are: Student Workbook self-paced learning activities to help you to understand key concepts and terms. The Student Workbook is broken down into several sections. Facilitator-led sessions challenging and interesting learning activities that can be completed in the classroom or by distance learning that will help you consolidate and apply what you have learned in the Student Workbook. Assessment tasks summative assessments where you can apply your new skills and knowledge to solve authentic workplace tasks and problems. Structure of the training program This training program introduces you to current practices in processing payroll. Specifically, you will develop the skills and knowledge in the following topic areas: 1. Recording payroll data 2. Preparing payroll 3. Handling payroll enquiries. Your facilitator may choose to combine or split sessions. For example, in some cases, this training program may be delivered in two or three sessions, or in others, as many as eight sessions. Recommended software In the course of completing this Workbook and the learning activities contained within, we will examine both the manual system of managing payroll, as well as a computerised system through the use of MYOB. If you don t have a current version of MYOB to work with, you can download a trial version of the software (with payroll functionality) from the MYOB website at <http://www.myob.com.au>. These versions are fully featured, but create files that can only be edited for 90 days from the date the file was initially created. The trial packages most suitable to the content of this unit are MYOB AccountRight Plus, AccountRight Enterprise or AccountRight Premier. Introductory information on using MYOB for the first time, setting up a client file and creating a chart of accounts is included in Appendix 3 of this Workbook. Updated user guides are also available for download from the MYOB website. BSBFIA302 Process payroll 1 st edition version: 1 2015 Innovation and Business Industry Skills Council Ltd Page 1 of 140
Introduction Student Workbook Note that the trial version sample file (ClearWater Pty Ltd) does not contain updated tax tables. Any new files created with trial version software will not contain updated tax tables. These updates are only available to registered users who have a valid product key. Recommended reading Some recommended reading and websites for this unit include: Australian Government, Fortnightly tax table, Australian Taxation Office, viewed July 2015, <https://www.ato.gov.au/rates/fortnightly-tax-table/>. Australian Government, Record keeping for small businesses, Australian Taxation Office, viewed July 2015, <https://www.ato.gov.au/general/other-languages/indetail/information-in-other-languages/record-keeping-for-small-businesses/>. Australian Government, Super, Australian Taxation Office, viewed July 2015, <https://www.ato.gov.au/super/>. Australian Government, The Privacy Act, Office of the Australian Information Commissioner, viewed July 2015, <http://www.oaic.gov.au/privacy/privacyact/the-privacy-act>. Australian Government, Weekly tax table, Australian Taxation Office, viewed July 2015, <https://www.ato.gov.au/rates/weekly-tax-table/>. Australian Government, Australian Taxation Office, viewed July 2015, <http://www.ato.gov.au>. Australian Government, Business.gov.au, viewed July 2015, <http://www.business.gov.au>. Australian Government, Fair Work Commission, viewed July 2015, <https://www.fwc.gov.au/>. Australian Government, Fair Work Ombudsman, viewed July 2015, <http://www.fairwork.gov.au/>. CPA Australia, 2008, Internal controls for small business, viewed July 2015, <http://www.cpaaustralia.com.au/~/media/corporate/allfiles/document/ professional-resources/business/internal-controls-for-small-business.pdf>. Curtis, V., 2005, Making the most of payroll with MYOB software, 2nd edn, Woodslane Press, Australia. Please note that any URLs contained in the recommended reading, learning content and learning activities of this publication were checked for currency during the production process. Note, however, that IBSA cannot vouch for the ongoing currency of URLs. Every endeavour has been made to provide a full reference for all web links. Where URLs are not current we recommend using the reference information provided to search for the source in your chosen search engine. 1 st edition version: 1 BSBFIA302 Process payroll Page 2 of 140 2015 Innovation and Business Industry Skills Council Ltd
Student Workbook Section 1 Record Payroll Data Section 1 Record Payroll Data This section will introduce you to the requirements for recording payroll data and calculating payroll in accordance with current legislation and individual workplace requirements. During the course of this unit we will use the scenario below (Green s Hardware Pty Ltd) to illustrate main points, provide workplace examples of payroll processing, and allow you to practice manual calculations. We will also refer to the MYOB sample file, ClearWater Pty Ltd, to illustrate the use of payroll software and allow you to practice entering data, processing payroll, and running reports. Scenario: Green s Hardware Green s Hardware Pty Ltd 88 Redblock Street Mentone Vic 3194 ABN: 22 777 888 999 Telephone: 9877 6666 Fax: 987 6667 Email: jim@green s.com.au Green s Hardware is a small business that employs four staff. You have been employed to process the weekly payroll for the business. Green s have adopted the National Employment Standards as part of their employment conditions for workers. Rates of pay are listed below. Warehouse manager (Jack Smith) $24.30 per hour Casual store person (Susan Wood) $17.50 per hour Payroll office officer (Mary Black) $18.50 per hour Owner/director (Jim Owen) $78,0000 per year The standard working week is 38 hours. Employees are entitled to an unpaid lunch break of 30 minutes. If normal weekly working hours exceed 38 hours, then overtime is paid at 1.5 times normal rate for the first three hours and two times the normal rate for every hour thereafter on any one day. The owner/director does not receive payment for overtime. What skills will you need? In order to work effectively to record payroll data, you must be able to: enter payroll details from source documents calculate payments to employees check payroll data with the designated person. BSBFIA302 Process payroll 1 st edition version: 1 2015 Innovation and Business Industry Skills Council Ltd Page 3 of 140
Section 1 Record Payroll Data Student Workbook Enter payroll details from source documents Whether you are using a manual payroll system or a computerised system such as MYOB, you will need to enter information into the system from source documents. These documents may include: Employee Details Forms tax forms (Tax File Number Declaration, Withholding Declaration) payroll details, including employment status, wages and awards various reports on employees earnings or history, including accrued entitlements, payroll register, etc. timesheets. Employee details On commencing employment, a form should be used to collect employee information. An example of an Employee Details Form is supplied in Appendix 1. As the payroll officer, you will need to have one Employee Details Form for each employee. You will need to update the form at least once every twelve months or as employees notify you of changes in their personal details. Scenario: Green s Hardware The following employee details are available for Green s Hardware. These details have been entered into a spreadsheet. Personal details Jack Smith Susan Wood Mary Black Jim Owen Address 22 Black St 14 Willow Rd 21 Allen St 4 Watts Rd Suburb Donvale Mentone Highett Beaumaris Post code 3111 3194 3190 3193 Telephone # 987 4444 0405226777 597 1144 978 1286 Date of birth 26/01/65 14/7/82 31/12/84 2/2/52 Learning activity: Personal details and tax forms Locate the template of the Employee Details Form in Appendix 1 and fill it out using your personal details. 1 st edition version: 1 BSBFIA302 Process payroll Page 4 of 140 2015 Innovation and Business Industry Skills Council Ltd
Student Workbook Section 1 Record Payroll Data Employee details in MYOB MYOB comes equipped with a sample company/client file. This company is called ClearWater, and we will revisit this file at several points throughout this Workbook in order to explore the functions of processing payroll in MYOB. When you first open MYOB you will see the screen pictured below. To open the sample company file, click Explore. The following window will appear. There is no need to enter a password here, simply click OK. BSBFIA302 Process payroll 1 st edition version: 1 2015 Innovation and Business Industry Skills Council Ltd Page 5 of 140
Section 1 Record Payroll Data Student Workbook The Command Centre window, pictured below, will appear. All the central functions of MYOB can be managed from here. MYOB Cards In MYOB, all contacts are managed in the Card File, including customers, suppliers and employees. New cards can be created and edited directly through the Cards List. To view, add or edit employee information in MYOB, click on Cards File and select Cards List, then click on the Employee tab Employee tab. Because we are using a sample file (ClearWater) a list of sample employees will appear in the next window. To have a look at the sort of information that is required for employees, click on the white arrow next to an employee s name. 1 st edition version: 1 BSBFIA302 Process payroll Page 6 of 140 2015 Innovation and Business Industry Skills Council Ltd
Student Workbook Section 1 Record Payroll Data In the example pictured below, we have selected Mary Jones, the first employee on the list. To create a new employee card, click New and fill out the blank fields displayed. MYOB activity: Employee card In the sample company client file supplied with MYOB (ClearWater), view the employee card for Mary Jones. MYOB activity: Create a new employee card In the sample company client file supplied with MYOB (ClearWater), create a new employee card for the following person: Fran Newman, born 21 February 1955 Address: 17 Morester St, Longville, NSW, 2447 Ph. 02 9895 6421, Mob. 0411 987987 Email: new_fran@gmail.com Tax forms All new employees are also required to fill in the following for tax purposes: Tax File Number Declaration Withholding Declaration. Samples of these forms can be downloaded from the Australian Taxation Office (ATO) at <http://www.ato.gov.au>. BSBFIA302 Process payroll 1 st edition version: 1 2015 Innovation and Business Industry Skills Council Ltd Page 7 of 140
Section 1 Record Payroll Data Student Workbook If you have difficulty locating the locating these forms, they can be accessed directly by following the links below: Tax File Number Declaration, viewed July 2015, <https://www.ato.gov.au/forms/tfn-declaration/> Withholding Declaration, viewed July 2015, <https://www.ato.gov.au/forms/withholding-declaration>. Employees need to complete a hard copy of the Tax File Number Declaration, which can be obtained directly from the ATO or from selected newsagents Australia-wide. Copies of these forms are also available in Appendix 1 of this Workbook and each will be examined in more detail below. Tax File Number Declaration The form is completed by every employee for every new job they commence and the completed form should be handed to the employer to assist them in calculating the PAYG withholding. The key functions of this form are listed below. It allows employers to pass on an employee s Tax File Number to the employee s superannuation fund. It identifies to the employer whether the employee is claiming the tax free threshold for this job. All taxpayers in Australia are entitled to a portion of income that is tax free. At present this is set at $6,000. The following two exceptions may apply. The tax free threshold can only be claimed from one employer in the case of an employee holding more than one job. Claiming the tax free threshold reduces the amount of tax that an employer holds from the employee s gross pay. Non-resident taxpayers do not get the tax free threshold and must pay tax from the first dollar earned. Taxpayers can also claim for their dependants, their isolated working zone or special tax offsets. The Tax File Number Declaration also advisers the employer of any HELP debt that needs to be withheld from the gross earnings. The form is completed in duplicate with the original going to the ATO and the duplicate kept with the employer. This is why an original hard copy of the form must be obtained from the ATO or a local newsagent. Withholding Declaration This form can only be lodged after the Tax File Number Declaration has been completed. It is used to advise the employer of any offsets and additions relating to the PAYG withholding amounts. It informs the employer of: any change to Australian residency status discontinuing an offset claim details of HELP and SFSS education debt tax offset entitlements requests to increase the amount of PAYG withheld 1 st edition version: 1 BSBFIA302 Process payroll Page 8 of 140 2015 Innovation and Business Industry Skills Council Ltd
Student Workbook Section 1 Record Payroll Data Scenario: Green s Hardware The following tax details are available for Green s Hardware. These details have been entered into a spreadsheet. Jack Smith Susan Wood Mary Black Jim Owen Tax File Number 125 355 459 625 989 124 453 572 593 143 597 363 Tax taxable Withholding variation Learning activity: Tax forms Threshold claimed Rebate $1,200 No Threshold Threshold claimed No No No Threshold claimed Study the sample Tax File Number Declaration and Withholding Declaration in Appendix 1. Go to the Australian Taxation Office website <http://www.ato.gov.au> and find out where you can download current copies of these forms. Payroll details Whether you use a manual or an electronic payroll system, you will need to record payroll details such as, for example, personal details, employment status and classification, pay details, superannuation, accrued entitlements, and tax information. You may also need to include information for payroll processing, such as bank account details, etc. Scenario: Green s Hardware The following payroll details are available for Green s Hardware. These details have been entered into a spreadsheet. Personal details Jack Smith Susan Wood Mary Black Jim Owen Employment classification Store manager Store person Payroll officer Owner/Direct or Employment category Permanent Casual Permanent Permanent Employment status Full-time Casual Full-time Full-time Commencement date 1/07/2006 11/11/2007 1/6/2009 1/7/2006 BSBFIA302 Process payroll 1 st edition version: 1 2015 Innovation and Business Industry Skills Council Ltd Page 9 of 140
Section 1 Record Payroll Data Student Workbook Jack Smith Susan Wood Mary Black Jim Owen Wages/salary Pay frequency Weekly Weekly Weekly Weekly Rate $24.30 per hour $17.50 per hour $18.50 per hour $78,000 pa Casual loading Nil 20% Nil Nil Overtime payable if worked Yes Yes Yes No Normal hours per week 38 38 38 38 Allowances Motor vehicle for business use. $50 per week Leave loading Yes No Yes Yes Superannuation Fund REST REST HESTA AMP Employee # 6279 1245 82146 33558 Entitlements Holiday 4 weeks Nil 4 weeks 4 weeks Sick/Personal leave 10 days Nil 10 days 10 days Compassionate leave Long service leave Opening balance entitlements 2 additional days each occasion 13 weeks after 15 years service 2 additional days each occasion 13 weeks after 15 years service 2 additional days each occasion 13 weeks after 15 years service Holiday 76 hours Nil Nil 152 hours Sick/Personal leave 24 hours Nil Nil 608 hours Long service leave Nil Nil Nil Nil Deductions Child support $50 $10 1 st edition version: 1 BSBFIA302 Process payroll Page 10 of 140 2015 Innovation and Business Industry Skills Council Ltd
Student Workbook Section 1 Record Payroll Data Jack Smith Susan Wood Mary Black Jim Owen Taxes Tax File Number 125 355 459 625 989 124 453 572 593 143 597 363 Tax threshold Threshold claimed No Threshold Threshold claimed Threshold claimed Withholding variation Rebate $1,200 No No No Bank account details Bank name CBA BENDIGO ANZ NAB Bank branch Donvale Mentone Highett Beaumaris BSB 063 777 625 033 063 357 347 001 Account # 1257 9875 3665 6547 Account name Jack and Ann Smith Employment status and classification of workers Susan Wood Mary Black Jim Owen The people working in your business can fall under a range of categories of employment. Each carries a different set of obligations for you as the employer and for the people who work for you. The categories are: Full-time employees work 38 hours per week with a continuing contract of employment. They have benefits such as paid sick leave, annual leave, holiday pay, long service leave, carer s leave, etc. Part-time employees work regular hours each week, but less than 38 hours and are given the same benefits as full-time staff, but these benefits are scaled to the proportion of hours worked. Casual employees are employed on an hourly or daily basis and do not have access to paid sick leave or annual leave. Casual workers are less likely to have access to regular work. Apprentices and trainees are employed under a contract of training for a certain period of time where they are undertaking a combination of work and recognised training to get a qualification. Independent contractors are hired to conduct a certain job or for a length of time, e.g. an electrician. The independent contractor does not work regularly for the employer. It is important to clearly distinguish if your workers are employees or independent contractors so that you can properly determine their wages and other employment conditions. You will also need to record the job title or employment classification which will often include a descriptive term and a coding, e.g. Administration Officer 3 (AO3). BSBFIA302 Process payroll 1 st edition version: 1 2015 Innovation and Business Industry Skills Council Ltd Page 11 of 140
Section 1 Record Payroll Data Student Workbook Employment status and classification of workers in MYOB Before you are able to assign an employment classification in MYOB, you first need to create the list of classifications at a system level. Note that in MYOB this classification is purely for reference purposes, and does not tie to the awards associated with the classification. This means that even though you enter the classification for each employee, you still need to manually enter all employment entitlements and provisions offered by the award for this classification of employment. From the Lists drop-down menu at the top of the window, select Employment Classifications. You will be presented with the list of all job roles entered to date. Because we are working within MYOB s sample company file (ClearWater), there will be several classifications already listed. To create a new employment classification, click on the New button, enter the name of the new job title/classification, and click OK. 1 st edition version: 1 BSBFIA302 Process payroll Page 12 of 140 2015 Innovation and Business Industry Skills Council Ltd
Student Workbook Section 1 Record Payroll Data MYOB activity: Employment classifications Within the sample company client file supplied with MYOB (ClearWater), add the following employment classifications to the Employment Classifications list. Administration Officer 1 (AO1) Administration Officer 2 (AO2) Administration Officer 3 (AO3) Storeperson Level 1 (SP1) Storeperson Level 2 (SP2) Suggested answers for this activity are in Appendix 4 of this Student Workbook. Employee awards and entitlements As you enter payroll details into your system, you will need to enter information relating to awards and entitlements. It is important to remember that employment and industrial relations law undergoes frequent change. The information that informs your employees awards and entitlements are up to date. You can do this by regularly checking the Fair Work Commission website at <https://www.fwc.gov.au/> or contacting the Fair Work Commission directly. Under current legislation, namely the Fair Work Act 2009 (Cwlth), employees are entitled to the following. Hours of work An employer can only require an employee to work: 38 hours per week plus reasonable additional hours if agreed in writing, an average of 38 hours per week across a 12 month period plus reasonable additional hours. Wages and salaries Under the current legislation, minimum wages are determined by pay scales (federal and state awards). If there is no applicable pay scale, then the employee will generally be entitled to get at least the federal minimum wage Casuals are generally entitled to a loading on the minimum wage. Different industries apply different loading rates. Apprentices, trainees and people under 21 have a separate rates table. BSBFIA302 Process payroll 1 st edition version: 1 2015 Innovation and Business Industry Skills Council Ltd Page 13 of 140
Section 1 Record Payroll Data Student Workbook Leave and public holiday entitlements All permanent and full-time employees must have access to at least: four weeks paid annual leave (or five weeks for some shift workers) ten days paid sick leave or carer s leave per year two days paid compassionate leave per occasion twelve months unpaid parental leave (also available to some casual employees). Part-time employees usually also receive these minimum entitlements on a pro rata basis. Public holidays In most industries and under most contracts, permanent employees are entitled to a day off with pay on public holidays. In Australia, there are federally recognised public holidays and state public holidays that vary from state to state. Personal leave Personal leave: includes sick leave and carer s leave is generally ten days per year, calculated cumulatively is calculated for part-time workers on a pro-rata rate, based on hours worked. Compassionate leave Compassionate leave allows for two days paid leave per occasion. Parental leave Parental leave can refer to: maternity (for new mothers) paternity (for new fathers) adoption leave (for parents adopting a child under five years). Long service leave An employee qualifies for long-service leave if they have worked for the same employer over a long period of time. This time varies according to the industry and the individual employment contracts. Long service leave is generally governed by state and territory laws and some awards. Employees generally qualify for a portion of this leave if they serve for a major percentage of this leave time. 1 st edition version: 1 BSBFIA302 Process payroll Page 14 of 140 2015 Innovation and Business Industry Skills Council Ltd
Student Workbook Section 1 Record Payroll Data The Fair Work Act From 1 January 2010, changes to the national workplace relations system came into effect. The changes affect most businesses in the national workplace relations system, including rules for employing staff, managing the payroll process and keeping of employee records. The key elements to the new work system are: a legislated safety net of ten national employment standards new modern awards revised enterprise bargaining arrangements streamlined protections dealing with workplace and industrial rights, including protection against discrimination and unfair dismissal two new organisations to regulate the system: Fair Work Commission Fair Work Ombudsman. The following businesses are generally not covered by the national system: most state government public sector and local government employers Western Australian corporations whose main activity is not trading or financial Western Australian sole traders, partnerships, or other unincorporated entities. The National Employment Standards (NES), dictated by the Fair Work Act, defines awards, entitlements and conditions directly related to the processing of payroll, such as hours of work and leave entitlements. Learning activity: National Employment Standards Search the internet to find the ten National Employment Standards. List them below: 1. 2. 3. 4. BSBFIA302 Process payroll 1 st edition version: 1 2015 Innovation and Business Industry Skills Council Ltd Page 15 of 140
Section 1 Record Payroll Data Student Workbook 5. 6. 7. 8. 9. 10. Describe how these standards impact the payroll process. Suggested answers for this activity are in Appendix 4 of this Student Workbook. 1 st edition version: 1 BSBFIA302 Process payroll Page 16 of 140 2015 Innovation and Business Industry Skills Council Ltd