Process and Manage Payroll using Xero ISBN: 978-1-925782-63-9 Part Number: 780 Version: V19.9 AUTHOR – Kerryn Maguire Kerryn has worked with accounting software products for over twenty years. Originally working from 1994 as an accountant with small business when accounting software became mainstream. Kerryn then focused on providing consulting and training services to small business in particular. Expanding from this into to providing curriculum-based resources to TAFE and private RTOs. From this she established Microstar Publishing and more recently incorporated Learner Link to provide a wide range of resources for the Accounting and Business Services Certificate courses. Kerryn has a long association with many TAFEs and RTOs across Australia. Kerryn’s fundamental aim is to provide resources that are easy to understand while providing a practical application of skills acquired. Kerryn also co-authors two titles for Cambridge University Press which are in their 4 th Edition – first published in 2000. Kerryn has considerable experience and knowledge: Bachelor of Applied Science Mathematics Diploma of Education Graduate Diploma of Accounting CRI: Criterion Referenced Instruction Member of Institute of Certified Bookkeepers Member of VELG Reproduction and Communication for educational purposes The Australian Copyright Act 1968 (the Act) allows a maximum of one chapter or 10% of the pages of this publication, whichever is greater, to be reproduced and/or communicated by any educational institution for its educational purposes provided that the educational institution (or the body that administers it) has given remuneration notice to the Copyright Agency Limited (CAL) under the Act. For details of the CAL license for educational institutions contact: Copyright Agency Limited Level 15 233 Castlereagh Street Sydney NSW 2000 Telephone: (02) 9394 7600 Facsimile: (02) 9394 7601 Email: [email protected]Sample for review
Transcript
Process and Manage Payroll using Xero ISBN: 978-1-925782-63-9
Part Number: 780
Version: V19.9
AUTHOR – Kerryn Maguire
Kerryn has worked with accounting software products for over twenty years. Originally working from 1994 as an accountant with small business when accounting software became mainstream. Kerryn then focused on providing consulting and training services to small business in particular. Expanding from this into to providing curriculum-based resources to TAFE and private RTOs. From this she established Microstar Publishing and more recently incorporated Learner Link to provide a wide range of resources for the Accounting and Business Services Certificate courses. Kerryn has a long association with many TAFEs and RTOs across Australia. Kerryn’s fundamental aim is to provide resources that are easy to understand while providing a practical application of skills acquired. Kerryn also co-authors two titles for Cambridge University Press which are in their 4th Edition – first published in 2000. Kerryn has considerable experience and knowledge:
Bachelor of Applied Science Mathematics
Diploma of Education
Graduate Diploma of Accounting
CRI: Criterion Referenced Instruction
Member of Institute of Certified Bookkeepers
Member of VELG
Reproduction and Communication for educational purposes The Australian Copyright Act 1968 (the Act) allows a maximum of one chapter or 10% of the pages of this publication, whichever is greater, to be reproduced and/or communicated by any educational institution for its educational purposes provided that the educational institution (or the body that administers it) has given remuneration notice to the Copyright Agency Limited (CAL) under the Act. For details of the CAL license for educational institutions contact:
Create an Account in Xero If you already have an account with Xero, skip this part and instead login into your account and go to straight to point 12 where we will start by looking at the Demo company.
1. Open a web browser such as Google Chrome
2. In the Address box type www.xero.com and press Enter
3. Click on Free trial
Note: The free trial will last for 30 days therefore it is important to only create your account when you are ready to start work on this user guide.
4. The Signup page appears. Enter your own details in each of the
10. The next step is to create a password. Enter a password and make sure you note it down somewhere as you will need it and the email address you used each time you log in.
11. Click on the Activate... button and
you are away Once you have created your password you can add details about your organisation. First, we will look a quick look at the Demo company as a way to learn about the broader functions of Xero. You will create your own organisation shortly. 12. Click on Try the Demo Company
The Demo Company account is opened, and the Dashboard window appears. The Demo company is a useful way of getting an idea of how the elements of Xero work together because a lot of data has already been entered. You can also enter invoices, payments, new customers etc. but the file will be reset in 30 days’ time.
My Xero provides access to your subscription information and the other Organisations you have set up or have access to. So far it may just be the Demo company.
You can click on Change organisation to jump between organisations and My Xero.
Your front page should look like this. The business currently has no invoices owed and no bills to pay.
The C Change Design studio is generally open from 8.30 am in the morning until 5 pm at night, Monday to Friday, Saturday 9 am until 1 pm. The studio is closed on Sundays unless a special event is happening.
Charlie is the proprietor C Change Design. She is usually at the studio whenever it is open, but she is not included in the payroll exercise.
Edward is a full-time customer service officer whose normal hours are Monday to Thursday, 8.00 am to 5 pm and 9 am to 4 pm on a Friday. Each day he has an hour break for lunch.
Camilla is a casual customer service officer who usually works her hours in the afternoon when required. Her shifts are usually from 12pm to 5pm whenever Charlie requires her to work.
Any draftsmen working in the studio besides Charlie are paid as subcontractors with a Withholding agreement.
4. Check that Payroll Admin has been ticked. This adds the Payroll
functionality to the Standard role.
5. Notice that Standard access is granted as the default, but you can also select the Adviser role which gives access to advanced accounting features and is ideal for accountants and bookkeepers.
6. There is also the option to give Bank account admin and Submit BAS – select the Bank account admin but we don’t need the BAS permission for this course.
7. Click on Update permissions to save the change.
You can invite a user into your organisation. If you are using this for your own business, you may find this useful for others who you want to be able to work on the file and for your accountant or bookkeeper. If you are a student using this guide you will find this useful for your teacher to be able to access your organisation. If you have more than one organisation you will need to invite them to each organisation separately.
1. Click on the tab C Change Design Settings
2. Click Users and then Invite a User
3. Enter the user’s first name and last name
4. Enter their email address
5. Click on Payroll Admin
6. Click on Business and accounting and choose which role you want to give them.
In this user guide, you will be processing the pays for employees of C Change Design. C Change Design is a small business owned and operated by Charlie Fox. The primary focus of C Change Design is to consult with clients to produce design primarily for workspaces. Workspaces vary from a studio space to whole buildings. Charlie also runs design workshops for the general public.
C Change Design General Conditions
Charlie is usually at the studio whenever it is open, but she is not included in the payroll exercise.
Charlie also engages subcontractors to process some of the designs and conduct some workshops.
Charlie employs two people to assist her with administration and general customer service: Camilla Adams and Edward Green. Edward is a full-time employee while Camilla works casually when required.
Edward Green Edward’s normal hours are Monday to Thursday, 8.00 am to 5 pm and 9 am to 4 pm on a Friday. Each day he has an hour break for lunch.
Camilla Adams Camilla usually works her hours in the afternoon when required. Her shifts are usually from 12 pm to 5 pm whenever Charlie requires her to work.
As part of their duties Charlie requires Edward and Camilla to use their own cars to collect and deliver designs, mail and special printing.
Pay details (timesheets) must be submitted to the supervisor/relevant payroll person to allow time for checking prior to processing payroll.
Employees have a set payday; therefore, the person responsible for payroll must always set aside a time, e.g. Monday morning to process pays.
Payroll security
Wages and salaries are a major expense for businesses, and steps must be taken to ensure that theft or fraud does not occur. Security measures in this business include:
Completion of timesheets is supervised to ensure each employee completes their own and no one else’s.
All payroll documents are kept under lock and key and only the person responsible for payroll and management have access to records.
If possible, the person who prepares the payroll should not be the person who collects or distributes cash wages to employees.
The cash wages, cheques, ListPay or electronic funds procedure may require authorisation by the supervisor.
All payroll documentation should be kept in a locked filing draw so that personal information is not available to other employees.
The following files should be kept:
A file for each employee in which to store Tax File Number Declaration, superannuation forms and personal information
A file for payroll reports for each pay run
A file for each superannuation fund and payment documentation
A file for each deduction payable, e.g. Cancer Council donation
A file for Awards, Agreements, pay rates, etc.
A file for WorkCover documentation.
Payroll confidentiality
Employees could work under different awards and conditions. Disclosure of pay details is prohibited. Disclosures can cause disharmony among employees, especially if some feel that they are receiving a lower wage than others who they consider to be working at a decreased capacity.
The bookkeeper must be aware of the contents of the Privacy Act 1988 in relation to the storage and security of personal information.
@ Go to www.oaic.gov.au and find the page about the Privacy Act 1988. Save this page in your web browser Favourites for future reference.
From 22 February 2018, the Privacy Amendment (Notifiable Data Breaches) Act 2017 established the Notifiable Data Breaches (NDB) scheme. The NDB scheme applies to all agencies and organisations with existing personal information security obligations under the Australian Privacy Act 1988.
The NDB scheme introduces an obligation to notify individuals whose personal information is involved in a data breach that is likely to result in serious harm. This notification must include recommendations about the step’s individuals should take in response to the breach. The Australian Information Commissioner must also be notified of eligible data breaches. The OAIC has provided comprehensive information about the NDB scheme at www.oaic.gov.au/privacy-law/privacy-act/notifiable-data-breaches-scheme.
Exercise: Recap
In the following exercise you will pay the employees weekly. C Change Design employs the following personnel:
Edward Green Customer service Full-time employee 38-hour week
Camilla Adams Customer service Casual – 10 to 20 hours per week
C Change Design is a small business owned and operated by Charlie Fox. The primary focus of C Change Design is to consult with clients to produce design primarily for workspaces. Workspaces vary from a studio space to whole buildings. Charlie also runs design workshops for the general public.
Charlie is usually at the studio whenever it is open, but she is not included in the payroll exercise.
Charlie also engages subcontractors to process some of the designs and conduct some workshops.
As part of their duties Charlie requires Edward and Camilla to use their own cars to collect and deliver designs, mail and special printing.
Edward has submitted the following timesheet. He has worked his normal hours. He has also used his car to do work for the studio and has entered the Kms on each day.
Employee Certification: I certify that the above hours are correct, no injuries have been sustained, my job description has not changed. I also understand wages will not be paid unless this timesheet has been authorised by a supervisor and received by the Payroll manager on time.
Employee Signature:
Supervisor Certification: I verify that the hours on this timesheet are correct.
Please ask your supervisor to approve the payment of this timesheet
Camilla has submitted the following timesheet. She works various hours as required by Charlie. Camilla sometimes uses her car to do work for the studio but did not perform any of these duties this week. Because she has worked 5 or less hours in each shift, she did not take a meal break.
Employee Certification: I certify that the above hours are correct, no injuries have been sustained, my job description has not changed. I also understand wages will not be paid unless this timesheet has been authorised by a supervisor and received by the Payroll manager on time.
Employee Signature:
Supervisor Certification: I verify that the hours on this timesheet are correct.
Please ask your supervisor to approve the payment of this timesheet
You have done most of the hard work in setting up the Pay Templates.
1. Click on the tab Payroll Pay employees
You will see a notice regarding Single Touch Payroll which is mandatory for all Australian businesses from July 2019. As we are using the trial organisation, we are not able to go through the setting up of STP at this point. We will explain the STP opt in and reporting processes, using a real business example, later in the book.
2. So, just click on Remind me later
3. Click on the + Add Pay Run button
4. The next scheduled pay run date will appear – which in our case is 8 July 2018 – click on Next
Our two employees appear. You will notice that the full wage is already calculated for Edward. Camilla’s earnings are currently 0.00 because we did not enter any standard hours in her pay template because she is casual her hours change from week to week. The -7.00 net pay is because of the deductions for the Cancer Council and the Social Club.
Let’s check Edward Green first.
5. Click anywhere on his row in the employee list to open his pay template with details filled in for this week.
The normal wage applies for Edward this week except for adding 20 kms travelled for work to pick up some stock.
6. Check that the figures match those in the screenshot on the following page and then click Save.
You may have noticed at the top of the screen in the Weeks payroll summary that the total payment is currently $7 less than Edward’s payment. This is because Camilla is currently -$7. Let’s enter her wage so it makes more sense.
Camilla worked 15 hours this week.
7. Click on the Employee drop list button above Edward’s name
8. Click on Camilla
9. Click into the Hours box for Ordinary hours and type 15 then press the TAB key to set
A new tab will open in your browser with the report.
6. Click on the previous browser tab to return to the Xero window and the Pay Run
7. Click on the View Reports button again and click on Payslips
A new tab will open with a page for each employee displaying their full payslip.
Look through the payslip and check for any errors. For example – incorrect hours, incorrect or missing deductions, accruing leave for a casual employee, if superannuation is missing check why.
8. Click on the previous tab to return to the Xero window and the Pay Run
9. Click on View Reports Payroll Employee Summary
10. Click on the Xero tab to return to the Xero window and the Pay Run
11. Click on View Reports Payroll Activity Details
Charlie has decided to take on a new employee, Simon Alexander to focus on Sales and Marketing. He will be paid a salary. Simon will be responsible for promoting, expanding and managing the business.
His salary is $60,000 per year which is above the rate paid to any level in the Clerks 2010 award. According to the Award:
Mr Simon Alexander
DOB 01 July 1982
1 Mt Pleasant Drive, Seaview, NSW 2111
Starting date is 16th Jul 2018.
Paid weekly
Tax File Number is 000-000-000
Claims Tax Free Threshold but also has a HECS Debt
Bank Details are Account name: S Alexander
Account BSB: 004-123
Account number: 852147
AustralianSuper Employee Number 123456
Entitled to Annual and Personal leave Accrual
Entitled to Long Service Leave Accrual
Entitled to Compassionate leave
As he is salaried, he is not entitled to Allowances, Overtime or Annual Leave Loading
Must have $100 per week deducted for child support
Donates $10 to Cancer Council and $5 to Social Club
Wants to Salary Sacrifice $300 per week to his AustralianSuper account
3. Click in the Earnings Rate box and click on Ordinary Hours
4. Click on Annual Salary then OK
5. Enter the Annual Salary of 60000
6. Type Hours per week at 38 – this is important, so Annual Leave and Personal Leave are accrued correctly
7. Click Save
Note: Most salary earners do not work just 38 hours – actual hours worked will vary widely. Entering 38 here however is important as this ensures the number of hours used in the calculation of annual and personal leave accrued is correct and that entitlements are calculated properly.
Salary sacrifice is simply adding an extra line to a Pay Template. On the Pay Template we enter the normal Superannuation Guarantee line plus another line for the RESC.
Note: In this example we will just use the usual expense account for Superannuation and the usual Superannuation payable account. In practice if you wanted to keep the amounts separate you could add new accounts for these and use them.
First, we will add the Superannuation Guarantee line.
1. Click on the Pay Template if it is not displayed
2. Click on + Add Superannuation Line
3. In the Contribution Type click on Superannuation Guarantee Contribution (SGC)
4. Check that the 478: Superannuation is selected for Expense Account
5. Check that 826 Superannuation Payable appears in the Liability Account box
Now for the Salary Sacrifice part of Superannuation.
1. Click on + Add Superannuation Line
2. Select the super fund to pay the super salary sacrifice from – it may be the same super fund or a different one – in this case we will stick with AustralianSuper
3. Click Contribution Type and click on Pre-Tax Voluntary Contribution (RESC)
4. Click on Fixed Amount - Simon just wants to pay $300 extra into his super each wage – in practice he could have paid a percentage instead
5. Check that the 478: Superannuation expense account is selected
6. Check that 826 Superannuation Payable appears in the Liability Account box
7. Click OK then click Save.
8. Click into the Amount box and type 300 as this is the amount Simon has elected to have sacrificed from his wage. Remember to click Save again.
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