Outsourced payroll, don’t assume outsourced risk
29 May 2017
The mishandling of payroll or payroll fraud has hit the headlines on a number of occasions with the latest being the alleged tax fraud of $165 million with an Australian Payroll provider. The question being asked is; who is liable for the unpaid ATO liabilities and employee entitlements?
Who is liable?
The move to outsourcing payroll is becoming an attractive solution to the ever-changing legislation and complexity of the Australian payroll. Outsourcing can transform your business, however, with the payroll industry operating in an unregulated market, businesses must perform their own due diligence when engaging with service providers. The misconception with businesses is that outsourcing payroll means you outsource your legal responsibilities.
Before engaging with a service provider we strongly suggest doing your research to mitigate significant financial risk. For example, a company Director has a legal obligation to ensure that the company is compliant and pays PAYG Withholding and Superannuation Guarantee Contributions (SGC) in full and on time. If this isn’t the case, the Director will be personally liable under the Director Penalty regime.
Don’t be the next headline
The latest headlines should prompt businesses to be proactive and review their current payroll systems and processes. Whether your payroll function is performed in-house or outsourced to a payroll provider, it is important for businesses and Directors to understand these key items:
- What controls are in place to ensure your payroll is compliant and payroll-related payments are processed accurately?
- Is the person or service provider qualified to prepare payroll? Invest in training with payroll staff or use a reputable service provider that is registered with the Tax Practitioners’ Board (e.g. a tax agent or a BAS agent).
- Do you know the details of your contractual arrangements in place with your service provider? Who is responsible to disburse the funds to your employees, to the employee superannuation funds and to the ATO? Are the funds held in a trust account by the service provider?