Ready to invest in a retail business, but worried about the stories you’ve heard of business owners who got payroll wrong and incurred penalties?

Whether it’s a juice bar, restaurant, clothing shop or petrol station, one thing all retail businesses have in common is the requirement to employ staff.

Staff numbers will largely depend on the size and nature of the business, however managing payroll in a retail environment can appear daunting.

To achieve optimal staffing levels a retail business you may require a mix of casual and permanent staff and these staff have different entitlements.

Business owners are generally busy balancing numerous obligations – marketing, inventory management, training staff, setting rosters, monitoring performance etc – and therefore the thought of managing payroll (and keeping the books up-to-date) can feel like a lower priority in times of pressure.

However, it’s important to get the payroll right as there are potential consequences and penalties if you get it wrong.

This article makes some practical suggestions on how to minimise the risk of getting it wrong, noting the Fair Work Act has been amended recently to increase penalties and places an even higher obligation on employers to maintain business records.

Here are five key things to consider in managing the payroll:

1. Understand that not all employees are the same

The first thing to appreciate is there are many classes of employees including:

• casuals
• shift workers
• part-time
• full-time
• resident or non-resident

Each class of employee has different entitlements. For example, permanent employees (part-time or full-time) are entitled to annual leave, whereas casual staff are not entitled to annual leave.

How much remuneration employees receive can also affect entitlements. For example, superannuation is generally payable on top of their wages if they have earned more than $450 in a month.

The Fair Work Act sets out minimum working conditions and these are referred to as the National Employment Standards. To gain an understanding of employee and employer requirements it’s worth spending some time reviewing the ATO guidelines, Australian government and Fair Work websites.

2. Get organised

Running a business involves managing and prioritising tasks. Schedule a designated time each week, fortnight or month (depending on the payroll cycle) to ensure payments are made correctly and recorded, staffing levels are monitored and employees being adequately informed

Develop your own checklists (the Fair Work and ATO websites have good examples) to ensure all necessary steps are completed. These checklists should cover off on ordinary pay cycles (e.g ensuring payslips are provided to employees within one working day of being paid) and infrequent requirements (e.g. preparation of end of financial year employee payment summaries).

Fair Work in its discretion may issue fines (infringement notice) for breaching record-keeping or pay slip requirements. To help protect vulnerable workers there is a reverse onus of proof on employers who don’t meet record-keeping or payslip obligations to disprove allegations in wage claims made in court. In other words, if the employer can’t disprove the employee’s claim, then the employee’s claim will stand.

3. Invest in software

Good software can greatly assist with payroll as well as financial accounting recording and reporting requirements. Look for software that has good reviews and designated customer support lines for queries.

Investing in software and computer systems can feel like a black hole, especially when you have other more obvious potential money-making things to invest in (e.g. new inventory or the next marketing campaign). However, there are number of benefits for investing in payroll systems for example:

• Automation / time saving. Remember Benjamin Franklin’s advice ‘time is money’
• Reporting ie. ability to review performance (at a granular level) on a timely basis and meet statutory reporting requirements
• Setting and monitoring of KPIs e.g. service or productivity based level targets. Helping to optimise staffing levels and maximising profit margins.

4. Be proactive and fix issues

Don’t sweep problems under the rug and hope they go away. If you are aware of an underpayment of employee entitlements, you need to rectify this as soon as possible.

Fair Work may issue a Compliance Notice if there’s a perceived breach of the National Employment Standards, a modern award, enterprise agreement or other instrument that specifies wage rates and entitlements.

This notice is typically only issued if an employer hasn’t agreed to (or perceived to be unlikely to) rectify the breach. Failure to comply with the notice may result in legal proceedings and penalties being issued (up to $31,500 for a company and $6,300 for an individual). Therefore, doing nothing isn’t really an option.

5. Help is available

It’s unlikely that as a start-up franchisee business you will have sufficient resources to fund a designated payroll team and as a new business owner you may not have adequate time to research payroll requirements. If this sounds familiar, seek professional advice from business and taxation accountants, as getting help early can save you money in the long run.

It’s worth checking with the franchisor first to see if they may have information that can guide you through the payroll issues.

Remember, the franchisee is responsible in ensuring employee entitlements are paid correctly ie. being directly liable for any shortfall and can be penalised.

However, since the introduction of the Vulnerable Workers Bill of 2017, an amendment to the Fair Work Act, franchisors may be responsible for making good any underpayment; if they had significant influence over the work place affairs of their franchise network and failed to take reasonable steps to ensure franchisees paid their employees appropriately.