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How to streamline payroll processing

What is payroll processing?

Payroll processing covers all the steps required to manage employee payments, payroll records and Inland Revenue reporting requirements. 

If you’re a small business owner, you might handle payroll processing yourself. Larger companies might hire a bookkeeper or payroll manager to handle payroll or outsource their payroll processes.

What are the main functions of payroll processing?

Payroll preparation

You need to open a payroll bank account to pay employees. You should only use this account to pay your employees and hold money for taxes and other payroll-related expenses.

Download our FREE payslip template here

Payroll calculations and deductions

You need to calculate each employee’s gross pay based on their contract, including pay for public holidays, leave and overtime. Payroll software, such as MYOB, can automatically calculate pay, KiwiSaver and other super contributions, and other deductions, such as:

  • PAYE (pay-as-you-earn withholding)

  • taxes on benefits, including bonuses and allowances.

Payroll payments

You should always issue payslips to each employee detailing their gross income, any deductions and their net pay. Payroll software can issue direct deposit payments and provide a portal through which employees can access and review their payslips.

Payroll record keeping

You must keep payroll records (electronic or paper) for 7 years.

Payroll compliance

You must submit an employment information form to the IR every time you pay your employees. If filing electronically through myIR or your payroll software platform, you must file the form within 2 working days of payday. If filing by paper, the form is due:

  • within 10 working days of the 15th of the month (for paydays on the 15th or earlier)

  • within 10 working days of the end of the month (for paydays on the 16th or later).

MYOB can automatically submit these forms for you.

How do you process payroll?

1. Choose a payroll system

There are 3 basic payroll systems: 

  • manual payroll (internal payroll processing for small teams)

  • outsourced payroll (a third-party service provider that manages all payroll functions)

  • payroll software (on-premise or cloud-based solutions for teams of all sizes).

Keep in mind that cloud-based payroll software like MYOB simplifies processes and doesn’t require you to manage software security or updates — this service is included in your subscription fee.

2. Create a payroll policy

Before you create a payroll policy, review Fair Payment Agreements and other minimum employment entitlements

Here are some other items to include in your payroll policy:

  • payment dates/schedules 

  • payment methods

  • timekeeping procedures

  • overtime rates

  • payroll deductions and

  • employee benefits.

3. Collect employee details

Next, you need to collect employee details, including: 

  • IRD number

  • bank and direct deposit details 

  • KiwiSaver or other superannuation scheme choice. 

If you use a cloud-based payroll system, it’ll typically allow employees to submit their bank, tax, and KiwiSaver or super details through a secure self-service portal, saving you administrative work and empowering employees to manage their own information.

4. Set up time-tracking

Employers have to maintain accurate records of employee hours to determine their pay. You could do this with a payroll system that has an integrated time-tracking and rostering feature. Alternatively, you could use an analog approach, such as paper timesheets.

5. Pay employees

The next step is to run payroll and pay your employees on time. Bear in mind weekends and public holidays could potentially delay payments. To counter this, you may have to run payroll a day or two earlier to make sure employees are paid on time.

Download our FREE payslip template here

6. Record your payroll

The final step is to update your payroll and keep accurate records of all payments.

Payroll processing best practices

Automate with payroll software

Forget about error-prone spreadsheets or third-party outsourcing and invest in high-quality, cloud-based payroll software that automates your payroll processes. 

Integrate your existing workflows

Better still, invest in payroll software that brings together other aspects of workforce management like onboarding, rostering, leave and time-tracking.

Set alerts and reminders

Schedule reminders for important dates, such as tax reporting deadlines and payroll processing days. 

Secure employee data

Cloud-based payroll systems use the most advanced security measures to protect sensitive employee data. Rest assured your data is protected against cyber-attacks, data loss or compromise. 

Enable employee self-service

Cloud-based payroll systems offer secure self-service portals, so employees can submit their personal information, IRD number, bank and KiwiSaver details themselves.

Stay compliant with payroll legislation

It’s essential to stay up-to-date with payroll rules, tax updates, labour laws and other government policies. However, it’s not always easy to do this. Cloud-based payroll software can keep you remain compliant, automatically updating to reflect changes as they occur. 

Automate payroll processing with MYOB

Payroll processing is a critical operation for any business — there's no room for error. For effective payroll processing follow these best practices: 

  1. Automate with payroll software.

  2. Integrate your existing workflows.

  3. Keep track of important dates and deadlines.

  4. Set alerts and reminders.

  5. Secure employee data.

  6. Enable employee self-service.

  7. Stay compliant with payroll legislation.

With MYOB’s cloud payroll software, you can automate your payroll processing and have the peace of mind that you have everything covered.

Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.

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