Archive for March, 2012

March 18, 2012

Salary Packaging and Tax Effective Employee Benefits


ppm logo - Edited (2)

Human Resource teams go to great length to research and offer Employee Benefits Programs to employees to achieve their organisational goals and Finance Managers work their hardest to evaluate and implement cost minimisation strategies. The provision of well researched and planned employee benefits can achieve both!

The age old debate between Tax Minimisation and Tax Avoidance remains, but where you can legally obtain a tax deduction why wouldn’t you! Employers should be looking to these tax advantages and promoting them to their most valued assets, if they truly feel that they are the organisations’ most valued assets.

Kerry Packer, the iconic Australian billionaire media magnate and rival to Rupert Murdoch said in a tax investigation in 1991 – “I am not evading tax in any way, shape or form. Now of course I am minimizing my tax and if anybody in this country doesn’t minimize their tax they want their heads read because as a government I can tell you you’re not spending it that well that we should be donating extra.”

A Disclaimer for Me

The information contained in this article is based on Australian knowledge only and any action taken as a result of this article is to be thoroughly investigated as to its’ currency and legitimacy with the appropriate taxation legislation in Australia and any other country you seek to apply any information from this article to. While I am only discussing Australian options, there will be similar options in other countries and these will provide food for thought for your particular country, organisation and circumstance.

A Disclaimer for You

Individuals Are To Be Explicitly Encouraged to Seek Professional Financial Advice!

I’ll say it another way… You absolutely must advise individuals to seek professional advice from their taxation department, their financial planner or accountant prior to taking up any financial related salary packaging or employee benefits programs. Each employees’ financial situation varies significantly and there are financial consequences in salary packaging and encouraging people to utilise tax advantages that may not suit their individual financial situation.

Why Would We Bother?

A carefully planned salary packaging system can provide various cost savings to an organisation. Many automatically think that the company has to incur the fringe benefits tax (FBT) on employee benefits. On the contrary, the salary package can be structured to incorporate the FBT component, or employees can make voluntary after tax contributions to minimise the FBT liability, or both.

I will restate the “Knowledge is Power” and “Fore Armed is Forewarned” from the previous article. A benefit of working for your company does not have to be a physical benefit; it can be the provision of empowering information that assists the employee to make decisions for a better future. Some of the information in this article is simply that, tax advantages that are open to individuals no matter which company they are employed by, that they simply may not realise it exists.

If you are the one that opens their eyes, then they will hold you or the company higher and value the contribution you have made to them. If you dedicate some time to seek, offer and advise employees of tax effective salary packaging and tax deductions or offsets, they will believe that you truly do care and that you are serving their best interests. You will gain credibility, build business relationships, contribute to employee morale and more. From a human resources perspective, there are so many reasons to bother and these are listed below.

Liaising with Human Resources & Finance

There are very few organisations where the Payroll Manager will be able to get most of these offerings across the line without liaising with HR & Finance, with some managers even wondering how you dare to have the audacity to bring them to the table. I recommend you do your homework and have prepared submissions that sell the implementation to both your HR & Finance people.

Highlight the benefits to both the organisation and the employees, do your numbers, study the social wellbeing aspects, calculate your numbers and present the ideas that will require organisational approval. If you can work with the management of HR & Finance to bring some or all of these ideas to fruition, your employees will be thankful, at the very least.

Key Arguments for Finance

  • Potential cost savings of carefully planned salary packaging
  • Zero cost effect to the organisation of the tax minimisation offerings
  • Potential to reduce turnover, thus reducing the cost of employment and the cost of payroll production

Key Arguments for HR 

  • Actively contributes to Employee Engagement
  • Contributes to Corporate Social Responsibility
  • Steers you in the right direction to becoming an Employer of Choice
  • The provision of valuable financial information contributes to relationship building, trust and loyalty
  • Employees achieve more with the same rate of income and perceive they are being rewarded

What’s In It for the Employees?

  • Employees obviously receive greater benefit from their salary or wage
  • The increased perception of working for an organisation that does actually value them

Beware of Award or Industrial Instruments Excluding Employees

In Australia, we are undergoing a modernisation of our industrial relations system and the employment awards within it (although some would question the use of the word “modernisation”). There have been awards that specifically exclude salary sacrifice arrangements, so ensure you review your employees’ industrial instruments for exclusions.

What are Non Salary Packaged Tax Minimisation Options for Employees?

The Australian Taxation Office has common tax offsets available to individuals. It is well worth investigating the offsets in your country and utilising your knowledge base (from Innovation 1 – Creating a Knowledge Base) to advise employees who may not know these exist or that they are entitled to claim them.

Pre-Declaration of Income Tax Returns by Employees (ITWV Variation)

In Australia this is known as an Income Tax Withholding Variation Application (ITWV) or if you are old like me, the former terminology is the 221D Variation. Do not presume that wage earners are automatically excluded from this as I’ve met many people with multiple investment properties, hands in businesses and all sorts of tricky financials who are school teachers, tradespeople and process workers.

The ITWV Variation Application allows employees to apply for a variation on their tax rates by anticipating their future tax return. Instead of waiting until the end of the financial year to claim, if approved, they will receive a reduced tax rate during the current financial year and will receive additional net pay on a per pay basis.

Publish information and forms on your knowledge base for employees who may not know that they can apply for tax variations on their earnings.

After Tax Voluntary Superannuation Contributions

Any employee can contribute additional after-tax monies to their compliant superannuation fund. There is no immediate financial benefit from this, but it has the potential to change an individuals’ future. If the employee is a low or middle income earner though, they may be eligible for the Superannuation Co-Contributions Scheme, where personal after-tax superannuation contributions may be matched by the government, up to $1,000.

After Tax Voluntary Spouse Superannuation Contributions

Additionally, if an employees’ spouse works part-time and is on a low income, they may be eligible for rebates on contributions (to a threshold) that they make to their spouses’ superannuation.

Deferred Income Payments

It is legal, under Australian taxation law to defer employee payments (by request of the employee) so the tax implications in one financial year are minimised. It is only viable to do this if the following financial years’ earnings are not going to be impacted greatly by the withheld payment. If an employee is going on parental leave, taking an extended period of leave without pay, or retiring this is an option that could have significant financial benefit for the employee.

Workplace Giving

Although this is technically salary sacrifice, it does not usually fall within the same structure or framework as the offering of salary sacrificed employee benefits as it is governed by separate legislation and is to be made available to all employees.

If your organisation is active in the community and values its’ corporate responsibility, you could work with your management team to encourage the board to commit to matching contributions. Your employees will feel that the company is working with them to improve the community. This program has so many benefits in the eyes of employees, it’s hard to understand why after years of the legislation being enacted, so many organisations still haven’t got a Workplace Giving Program in place.

Open discussion with registered business owners or ABN Holders to test the legitimacy of them contracting to your organisation.

This is an area of risk, but again, if researched and managed properly is a potential winner for organisations and employees. There are many people employed by organisations that have businesses registered and are true or legitimate contractors. Organisations should really investigate the cost savings of employing these people as contractors, providing they can pass the employee-versus-contractor test under the taxation system.

Use your Current Creditor List as a Potential Employee Benefits List

Almost every organisation has creditors (and debtors for that matter) who wouldn’t mind expanding their businesses and creating a few new customers. If your business is sizeable enough, it is worth speaking to a few of these other organisations to see if they would like to offer benefits or discounts to your employees, to potentially increase their customer base. Employees will see the benefit in discount or special offerings for:

  • Vehicle leasing or purchasing
  • Banking or Financial Products
  • Tools and equipment
  • Computers and computer software
  • Practically anything is of value to someone!

Partner with Personal Service Professionals to Provide Employee Benefits

Find professionals that are willing to offer their services at a discounted introductory price, with the potential to create a larger client base. Any professional who understands the lifetime value of a customer, would jump at the chance to service a reasonably large potential client base.

If you directed 100 new clients to a professional on the first occasion, the lifetime value of that customer base alone would far outweigh any introductory discount on the initial service. A percentage of the initial 100 clients will refer the professional to their friends and family. If that professional returned every six to twelve months and secured new employees as customers their business will grow exponentially just from your partnering invitation.

What can you offer?

  • Will & Estate Planning
  • Financial Planning
  • Budgeting Assistance/Debt Reduction Strategist
  • Health Insurance Analyst
  • Home Loan Analyst
  • Tax Preparation Services
  • Legal Services

You could also partner with local businesses to provide discounts or loyalty programs such as Car Washes, Cafes, Dry Cleaners, Automotive Repairers, Home Maintenance & Cleaning, Tradespeople… the list is endless and your employees will love it.

Salary Packaging Employee Benefits… now it becomes more complex

Public Benevolent Institutions (Charities) and Hospitals in Australia In Australia

Public Benevolent Institutions, Hospitals and similar industry bodies are legislated separately for salary packaging. If your employer falls under this legislation, fringe benefits are offered and taxed separately and differently to the standard Fringe Benefits Tax legislation.

Employee Benefits are “Fringe Benefits”

Under the Australian Taxation System In Australia, employee benefits are not income taxable but are fringe benefits taxable (including benefits provided to spouses, family members and associates as a result of the employment of the individual).

Minimise the FBT liability by Employee Contributions

FBT liability is incurred by the employer and is a major discourager to organisations. Employees who make voluntary FBT contributions can minimise or eliminate the employers FBT expense. Your organisation can offer salary packaging with a company policy that provides that employees will incur the FBT liability and incorporate it into their salary package or have them make after tax contributions.

Organisations can Claim Back the Goods & Services Tax (GST)

Where the organisation provides a benefit, then the amount expended on the benefit becomes the organisations expense. The benefit provided to the employee is a good or a service purchased or leased by the organisation and therefore, the organisation is entitled to claim the GST back on that expense (taking into account Goods & Services Tax legislation, record keeping requirements and the actual “claim ability” of certain items).

Without an effective and efficient management system, managing the GST claim back of employee fringe benefits can be an administrative nightmare. As with all complex administrative processes, a good think, a good plan and good management will resolve the issues.

A warning for employers who provide employee benefits

If you provide cash benefits to employees, such as Expenses Payment Cards, the obligation is on the employer to ensure employees are purchasing legal goods and services. An expenses payment card program should not be implemented without the explicit requirement to produce valid receipts to support the expense, which should tie in to the expenses payment card statements, which the employer should receive digital copies of for record keeping and benefits management purposes.

A warning for employees who receive employee benefits

If an employee receives an employee benefit under a salary sacrifice arrangement (including all purchases on expenses payment cards), the employee is not entitled to any of the following:

  • Claim an income tax deduction for the expenses
  • Claim GST on the item as they did not purchase it
  • Depreciate the asset on an income tax return

It is important that employees understand this, as they may be falsely claiming deductions on tax returns.

Example 1: Right to claim Educational Expenses Tax Deduction In Australia, we have the ability to claim deductions for certain educational expenses for our children. If an employee has an expenses payment card issued by the employer as an employee benefit and uses that card to purchase a computer, monthly internet connection fees and stationery for their claimable school child, they will not be able to claim these items as a legitimate tax deduction. These items were legally purchased by the employer and the employer has the right to the expense as a business deduction and any associated GST. For the employee to claim a legitimate tax deduction on these items, they would have to purchase them out of income taxed earnings.

Example 2: Claiming a purchase as a legitimate business expense If an employee also happens to own a business and purchases business items on an employer provided expenses payment card (or physically receives these items as an employee benefit), the employee is not entitled to claim these items as legitimate business expenses, not claim the input tax credits on them. These items are not eligible for depreciation under the employees business either, as they are not legitimate business expenses. The goods or services were legally purchased by the employer and as such are legitimate business expenses for the employer not the employee.

Example 3: Using Employee Benefits for Investments (Properties or Other Investments) Serious issues arise when employees utilise employee benefits (including expenses payment cards) to fund investments (properties or otherwise) or purchase items for investment properties. Again, an individual cannot claim a tax deduction where the investment or the purchase has legally been made by the employer, through the provision of an employee benefit.

Example 4: Claiming Home Office Expenses on a Rented Home where the Employer Makes Rental Payments under a Salary Sacrificed Arrangement An employee has their total rental payments paid under a salary sacrifice scheme and all other expenses are paid by the employee from after tax wages, including their utility bills. If the employee or their spouse is a business owner and seeks to claim their home office and a portion of the utilities as a tax deduction, they are not entitled to do so. It is not a legitimate tax deduction as the employer is legally paying the rent on the home. They are entitled to claim a portion of the utilities however as these were paid from after tax wages. If your organisation offers benefits that could impact individuals in these ways, it is imperative that you advise them of these issues. Mortgage/Rental payments and expenses payment cards are the two primary areas of concern, but there are others.

Basically, employees need to understand that if they are not paying tax on it, they shouldn’t be able to claim a tax deduction on it!

What Can You Offer With Your Salary Packaging?

An employee can be provided any legal benefit and if the organisation agrees, just about anything can be paid or provided under a salary sacrifice arrangement, again provided it is legal. Any offer of salary sacrifice should be accompanied with strong encouragement to the employee to seek professional financial advice, as some benefits can actually expose the employee to financial losses in other areas.

An example of this is the salary sacrificing child care fees in Australia, which would increase the employees’ assessable income with the additional fringe benefits value added to their gross reportable income. This in turn, could reduce the employees’ claim to childcare rebate, making the employees’ child care fees even more exorbitant than they already were.

If you have a staff cafeteria, it is common to offer meal expenses payments as an employee benefit whereby staff make their purchases as they choose and the bill is paid by the employer to a pre-determined annual value.

Other offerings can include:

Health and Wellness Programs

  • Weight Watchers or similar
  • Quit Smoking Programs
  • Nutritionist
  • Gym Fees
  • Health Insurance

Life & Other Insurances

  • Life Insurance (there is now a minimum requirement in super funds)
  • Funeral Benefit
  • Total & Permanent Disability (TPD)
  • Accident Cover
  • Trauma Insurance
  • Income Protection

Note: Income Protection insurance is claimable as a tax deduction at Item 24 on the Individual Tax Return, so professional advice should be sought on the tax effectiveness of salary packaging Income Protection Insurance.

Payment of Student Loans

Employers could offer payment of student loans (HELP/SFSS Debts in Australia).

Employee Benefits Exempted from Fringe Benefits Tax

The Australian Fringe Benefits Tax legislation has the “minor benefits” exemption. A minor benefit is a benefit which has a ‘notional taxable value’ (grossed up value) of less than $300. Where you provide an employee with separate benefits that are in connection with each other (for example, a meal, a night’s accommodation and taxi travel) you need to look at each individual benefit provided to the employee to see if the notional taxable value of each benefit is less than $300.

Don’t think you can provide a myriad of minor benefits to an employee though, as a consistent provision of benefits of this kind, could be construed as an expenses payments fringe benefit.

Please note that employers must report on Payment Summaries, all Fringe Benefits items $2000 and over (grossed up value, per the Payment Summaries gross up method) and this has to be taken into consideration by employees for determination of assessable income for other financial situations.

Industry related education and training courses would be accessed by more people if they were more affordable. Offer employees access to it appears that someone else is footing the bill for it. While this is salary packaging, I’ve separated it from the salary packaging section, as an industry or “in the course of your profession” course does not fall under standard employee benefits incurring fringe benefits tax.

Professional memberships and subscriptions to trade journals or industry publications can be provided to employees either as a company offering or under a salary sacrifice arrangement, if the budget doesn’t extend to servicing all of your employees’ professional subscription and membership requirements.

There is provision in the Fringe Benefits Tax Assessment Act (Section 58N) to provide Emergency Assistance as exempt employee benefits. Benefits you provide by way of emergency assistance are exempt from FBT. Emergency assistance is assistance for immediate relief of a victim, or potential victim, of an emergency where the assistance is any of the following: first aid or other emergency health care; emergency meals, food supplies, clothing, accommodation, transport or use of household goods; temporary repairs; any similar matter.

Read up on this before you offer it though as there are restrictions on the provision of “health care” and these few paragraphs do not cover the complexity of Emergency Assistance as exempt employee benefits.

Salary Sacrificed Superannuation

Salary sacrificed super contributions are not a fringe benefit and are treated as employer contributions. Employers receive the tax benefit of paying additional funds into employees’ complying superannuation funds. There are complex restrictions on salary sacrificed super though and both employers and employees must remain vigilant of the contribution caps, maximum thresholds, concessional components and age based limits.

The tax on entry of funds into a superannuation fund is 15% (and 16.5% on exit), so an employee pumping salary sacrificed super away needs to take into consideration their retirement needs and the tax rate that would apply to this money if they earned it as salary or wages.

Beware of the caps! There are caps on the amount of concessional (before tax) and non-concessional (after tax) contributions you can make each year. If you exceed the cap, there is an excess contributions tax of an additional 31.5% of the amount exceeding the cap.

Access to Financial Assistance Outside of Your Organisation

This was mentioned in the Innovation 1 article, but is such a pertinent item in todays’ crazy world with environmental disasters, high divorce rates, the rise in terminal illnesses, the collapse of the housing markets and all the other day to day tragedies we face as a community. Your employees may be in desperate need of financial assistance and most of us don’t like to advertise our desperation, so if we post on our knowledge bases ways to access financial assistance, we are providing an invaluable community service to our employees.

Look on your local council, state & federal government and welfare department websites for information that would assist your employees. Private companies also are able to assist in times of financial crisis, such as mortgage providers freezing loan repayments, superannuation funds releasing funds for crisis and so on.

Advising Employees of Available Tax Deductions & Tax Offsets

It costs nothing to post information on your knowledge base about employee eligibility to legitimate tax deductions and tax offsets. Many organisations are wary of their liability in providing such information, which is easily waived by posting tax department published PDF files or internet links to your taxation departments publications.

Some people do not realise that they are entitled to claim for the travel between work and their training institution, or the difference between what they normally would travel for work and the extended travel to a training course or business meeting. This is a value add for your “customers” that may have a significant impact on them.

Self Education expenses is another area where employees may benefit from more information as they do not realise the extent of the deductions they are entitled to.  Additionally there is the Housekeeper Tax Offset; Education Tax Refund; Family Tax Offsets; and Investing on Behalf of Children.

Now to Get Started…

The offering of employee benefits is a minefield, but it’s a minefield worth crossing if you truly want to offer your employees the best value out of their salaries and wages and provide an employee benefits program that engages rather than alienates employees.

If you are unsure what your employees would be interested in, ask them! Even if you got together a working party and included a cross section of your employees in that working party to begin the big picture design. If you do your homework and it falls on deaf ears, at the very least you can begin to populate your knowledge base with the wealth of information that employees could utilise on eligible tax deductions and tax offsets. If they know about these options, they can plan for them and save their receipts.

Should you decide to embark on this path, I wish you well in your endeavours and as always would love to learn more from you or help you in your journey. You can open discussion via this site or contact me directly at louisevidler@optus.ap.blackberry.net

© 2012, Louise Vidler

Excerpts from the Australian Taxation Office:

About tax minimisation and tax avoidance schemes

You are entitled to minimise your tax liabilities through investment activities and to receive the benefits provided for under the law. Tax minimisation is when you legitimately arrange your tax affairs to reduce the amount of tax you pay. These arrangements comply with both the letter and spirit of the law. However, investment schemes and legal structures that do not comply with the law are considered to be aggressive tax planning arrangements – referred to as tax schemes. A tax scheme is an artificial or contrived arrangement to avoid or defer tax obligations. Schemes often involve a series of complex transactions. They typically move funds through several entities, such as trusts, in order to avoid or minimise tax otherwise payable. Schemes may also involve distorting the way funds are being used to enable a taxpayer to claim deductions they are not entitled to.

What is a salary sacrifice arrangement?

A salary sacrifice arrangement is also commonly referred to as salary packaging or total remuneration packaging. It is an arrangement between you and your employer, whereby you agree to forgo part of your future entitlement to salary or wages in return for your employer providing you with benefits of a similar value.

What are the requirements for an effective salary sacrifice arrangement?

The requirements of an effective salary sacrifice arrangement are: • the arrangement is entered with your employer before you perform the work • there is an agreement between you and your employer • there should be no access to the sacrificed salary – if a fringe benefit that has not be provided by your employer is cashed out at the end of a salary sacrifice arrangement accounting period, the amount cashed out is your salary and is taxed as normal income.

If you have any questions you would like to raise personally, please email Louise Vidler at The Professional Payroll Manager.

© 2012 Louise Vidler T/As The Professional Payroll Manager.  All rights reserved.

All materials contained on this web site not otherwise subject to copyright of other parties are subject to the ownership rights of Louise Vidler T/As The Professional Payroll Manager. Louise Vidler T/As The Professional Payroll Manager authorises you to make a single copy of the content herein for your own personal, non-commercial, use while visiting the site. You agree that any copy made must include the Louise Vidler T/As The Professional Payroll Manager copyright notice in full. No other permission is granted to you to print, copy, reproduce, distribute, transmit, upload, download, store, display in public, alter, or modify the content contained on this web site.

Advertisements
March 16, 2012

Bringing in the WOW! Factor


ppm logo - Edited (2)

People can smell emotional commitment from a mile away. Tom Peters, Author

Compiled with edited extracts from various works of Tom Peters, as who else could describe the WOW Factor better than the man who invented the term.

The ‘WOW Factor’ is a registered trademark of the author Tom Peters, who coined the phrase some ten years ago. He came to fame as the co-author of In Search of Excellence and has since published multiple brilliant books on how to deliver ultimate customer service in all facets of business operations.

What is the WOW Factor?

  • It is that feeling where your heart races and your face smiles when you have received fantastic or even brilliant service.
  • It is when people or companies have stepped out from the crowd of look alikes and done something to make you smile!
  • When something is done or said to make you a brilliantly satisfied customer (or employee)!
  • It is when something is done to make you a devoted customer!
  • It is when something is done that you simply did not expect!

How do I get the WOW Factor happening?

  • Make the words glow, tingle, thrill, dazzle, delight and wow the primary basis for evaluating the quality of your products and services.
  • In the age of email, supercomputer power, the internet and the global village attentiveness – a token of human kindness – is the greatest gift we can give someone.
  • Obsess on the little stuff! 1000 little things are greater than one big thing
  • It is simply when you walk out as a customer and just say… WOW!

How do I get the staff customer focussed?

  • Forget barking orders.
  • Forget issuing a Customer First Vision Statement.
  • Prominently post customer statistics all over the place.
  • Distribute all good and bad customer letters to everyone.
  • Plaster pictures of customers (buyers, products, facilities, etc) all over the place.
  • Start making weekly awards for little acts of customer service heroism

If employees are inundated with practical customer information rather than vague exhortations, they won’t be able to keep their distance. They’ll begin to ‘think customer’ – and maybe even ‘dream customer’.

March 16, 2012

Are You an Achiever?


One characteristic of winners is they always look upon themselves as a do it yourself project.  Denis Waitley, American Author, Speaker & Trainer

 

Over achievers make up the top 4% of the population.  Studies reveal they share 10 personality traits.

  1. High Self Esteem – success is directly related to self esteem, they are confident and not easily discourage, they are determined in all aspects of business and private lives
  2. Accountability – take responsibility, don’t blame other for their failures, nor depend on others to make them happy, failures are seen as learning experiences for the future
  3. Industrious – work to achieve their goals, can have high hopes and goals, but need to work them to succeed
  4. Ambitious – ambition is stronger than skills – determination to succeed
  5. Empathy – put others needs before their own to ensure a win/win scenario.  Peak performers love to bond
  6. Goal Oriented – the driving force and the desired result of your actions
  7. Disciplined – always work harder than expected and enjoy activities that require discipline
  8. Integrity – believe in your work and are truthful in its conduct
  9. Optimism – will not quit in the face of adversity.  Learn from defeat and find lessons in even the most devastating circumstances
  10. Friendliness – ability to relate in social and business environment.  Attract a solid network of supportive friends and business partners.

EXERCISE: Read each statement and give yourself a score that is the most accurate description of yourself. 

High Self Esteem

Score 5

Score 2 more

Score 3 more

If you are proud of yourself

If you believe you can do anything

If you believe you can become a millionaire

 

Accept 100% Responsibility

Score 6

Score 2 more

Score 2 more

If you feel it is your job to motivate yourself

If you don’t get de-motivated by others

If you believe you can prosper in a poor economy

 

Top 4% Work Harder

Score 2 points each if

 

Work more than 8 hours per day

Take work home

Don’t talk to friends at work at all

Work while commuting

Don’t take scheduled lunch or coffee breaks

 

Above Average Ambition

Score 4

Score 4 more

Score 2 more

If you want to retire independently

If you want to be the No 1 in your field

If you describe yourself as wildly ambitious

 

High Levels of Empathy

Score 6

Score 4 more

If your clients benefit more from your sales effort than you

If you deliver far more than is required

 

Top 4% are Goal Oriented

Score 2 points each if

You have daily written plans

You have weekly written plans

You have monthly written plans

You have yearly written plans

You have written life time goals

 

High Levels of Self Discipline

Score 4

Score 2 more

Score 2 more

Score 2 more

If you exercise regularly

If you keep promises 9/10 times to yourself

If you keep promises to clients

If you do today what could be done tomorrow (pack)

 

Top 4% Have Strong Integrity

Score 5 points each

If you genuinely believe in your companys’ service

If you genuinely do what’s best for your client always

 

Are Optimists

Score 0

Score 5

Score 7

Score 10

If you are a pessimist

If you are a realist

If you are an optimist

If you are always looking for the silver lining no matter what

 

Make Friends Easily

Score 0

Score 3

Score 7

Score 10

If you don’t like most people

If you get along but don’t want to be friends

If you can make friends with anyone

If you cant think of anyone you hate at all

 

TOTAL YOUR SCORE

 

HOW DID YOU SCORE?

50 or below           Don’t work with any other human!

51 to 60                 Steer clear of business situations

61 to 70                 Average people skills, need constant motivational training

71 to 80                 Solid people skills – refine these skills to improve

81 to 90                 Born to be a peak performer – keep training to improve yourself

91 to 100               You are the very best, if your career isn’t on the fast track – you must have lied on your test

(This article reproduced from Community Business Institute Australia,Business Workshops)

March 16, 2012


SCORE Memphis

You couldn’t have direct deposit or online banking without the Automated Clearing House (ACH) network, the electronic system that handles millions of financial transactions in the United States every day. Unfortunately, online banking through the ACH network has generated a new cyber crime—ACH fraud, which is similar to good old-fashioned check fraud.

Payroll, which makes abundant use of the ACH network for direct deposits and other transactions, is particularly vulnerable to ACH fraud. And according to the FBI, this fraud is growing, with new victims and cases opened every week.

The new identity theft

ACH fraud exploits valid online banking credentials. It usually begins when a company employee accesses a bank’s online cash management system to initiate ACH files for direct deposit. Typically, this employee receives a “spear phishing” email that contains an infected attachment or directs her to an infected website.

Once the email recipient opens the attachment or…

View original post 327 more words

March 14, 2012

Creating a Payroll Knowledge Base


ppm logo - Edited (2)

“Ask yourself who uses what you do and how valuable to them is what you do.  Then ask yourself whether they recognise themselves as your customer.”  Anonymous

Note: I have attempted to eliminate usage of country specific names and terms for ease of reading by a global audience.

 A knowledge base, for those that haven’t seen one previously, is exactly what it sounds like: a base point where knowledge is stored, to be accessed by those who need to understand information, requirements, policies, procedures and so on.

If you are in a large organisation, there has probably been a great deal invested in the design and creation of an intranet to service as a knowledge base for all the business and support units.  Smaller organisations may not even have an intranet, in which case your knowledge base can be provided in print format in the form of Employee Handbooks, New Employee Packs, Information Handouts, Administrator & Manager Guides to Payroll and internal Payroll Operations Manuals.

Why bother?

Our first reason to bother with a knowledge base is to provide service excellence.  Organisations invest millions and go to extreme lengths to implement customer service policies and programs for their external customers.  These same organisations espouse strongly their commitment to their most valuable assets: their employees, but what level of human effort or monetary investment is contributed to providing decent customer service to internal customers?  For payroll teams, these internal customers are the employees you pay, the management you report to (hierarchically and the provision of actual reports) and the dealings you have with all other people that “touch” your payroll service.

You’ve all heard the maxims: Fore armed is forewarned; Knowledge is Power; You can’t manage what you don’t measure.  A good knowledge base will contribute to organisational effectiveness and work as a response to each of these maxims.

As you read through the article you will come to understand how a well thought out, constructive knowledge base, that is marketed well, can also significantly impact each of the following:

  • Building the payroll teams’ knowledge and capabilities
  • Improvement of payroll efficiency, compliance and integrity
  • Contribution to the minimisation of Error Rates
  • Provision of value added services
  • Empowerment of payroll team members, employees and participants in the payroll process
  • Provision of transparency in the payroll process
  • Contribution to the protection of intellectual property and business processes
  • Assisting in the building of  business relationships
  • Contribution to the credibility of the payroll process
  • Highlighting the complexity of the payroll process
  • Education of your customers on the importance of compliant data inputs
  • Reduction of your daily reactive fire fighting activities and a turning of the tide into pro-activity

Who are we supposed to serve with a Knowledge Base?

A knowledge base should service the payroll team, all contributors to the payroll process and our multiple customers including the employees we pay, the managers we provide reporting to and the other support units of the organisation including the Finance and Human Resources teams.  Depending on the size and diversity of the organisation, additional support units could include departments that specifically handle Workers Compensation, Corporate Governance, Statutory Taxation, Payroll Accounting, IT or Payroll Systems Administration and others.

For the benefit of simplicity, we will focus on our primary customers:  employees, managers and administrators of payroll information.

How complex does a Knowledge Base need to be?

Stick to the KISS (Keep It Simple Stupid) principle every time.  The less complicated a knowledge base is, the more it will be accessed and utilised.  The volume of content you place in it will be driven by the degree of complexity in each payroll or business and the extent of employee benefits the company provides.

What information could employees possibly want out of it?

Ask yourself what problems your employees commonly have.  What are their primary concerns and challenges in the payroll process?  How can you help?  You can build enormous credibility by pin-pointing and addressing your employees’ pain points.  The provision of information that benefits employees and assists them to make informed payroll decisions and transactions, shows that you are empathetic to them and focused on servicing them.

The first place to look for employee pain points is to analyse your most consistent payroll errors and queries and establish what the constants are.

If, for example, you are consistently baffled by the inability of employees to correctly complete a tax form, then this is a must have on your knowledge base.  In Australia, the tax file number (social security number in the US) declaration form has an information sheet attached explaining how to complete the form, but there are always the same issues presenting themselves by employees not completing the forms correctly.  Additionally, if an employee submits their form incorrectly, by law, we are to interpret it using the worst case scenario which can result in taxing the employee at the highest marginal rate.  Living by this rule is easy enough from compliance and processing perspective, but it causes great personal grief to employees, which is then imparted onto the payroll officer handling the aggrieved employees query.

This can be resolved simply, with the introduction of a document on your knowledge base titled “Understanding the Tax File Number Declaration”.  Within the document, an explanation of how the taxation will be applied by certain answers and what the implications will be of not providing a tax file number within the required time limit.  This simple task reduces so much grief and calls employees to action, as it is in their highest interest not to be taxed half of their pay.  I have seen in the US, it is common for employees to misunderstand the W2 and W4 forms, this can be resolved by explaining the difference between, and the importance of, the two forms.  If you need the explanatory note to be a little more “in your face”, attach it to the front of the relevant forms in the New Employee Packages or have it pop up online prior to them accessing the relevant online form.

The key to providing information that calls for action is to use minimal words, maximum impact and the strongest motivators.  Remembering that many people are visual beings, include pictures!  There’s not a lot you can do about the auditory beings, but technology might assist in that one day.

In Australia a few years back, salary packaging was extended by legislation, to all staff of hospitals and charitable organisations, in an attempt to counteract the low award wages and attract people to the industry.  The biggest issue that came out of this though for employees, was the impact the seemingly attractive salary packaging had on their student loans, child support, child benefits and any other welfare payments they may have been claiming.  Employees took up the salary packaging option without realising that it increased their assessable income for all of these other aspects of their lives.  Once the end of the financial year arrived and they started submitting their tax returns, all hell broke loose.  People were being assessed on their ordinary earnings, plus the grossed up fringe benefits and finding they had been overpaid social security payments and were underpaying student loans and child support.  These industries are full of university graduates and also sadly have a high percentage of welfare recipients, in comparison to other industries.  It was chaos.

To counteract this for the future, a guide titled “Understanding Salary Packaging” was introduced to explain these issues and each employee had to sign that they had read the guide prior to taking up salary packaging options.  In the guide, there were massive STOP signs and warning symbols to highlight the potential issues for them.  We provided little tips on how to circumvent future welfare or student loan debts, by explaining how to contribute extra tax to account for the salary packaging impacts.

Another constant query is new employees asking when they will be paid, which should be addressed in induction or orientation programs, but can be added to your knowledge base.

In your knowledge base, include explanations for employees on “what if”, “how to” and “what do I do” scenarios for the common pay queries:

  • What do I do if my pay is short
  • What do I do if I haven’t been paid
  • What do I do if I lose my pay card
  • How to change your bank details
  • How to apply for salary packaging
  • How to apply for leave (and leave payments in advance)
  • Why have you taken garnishees or child support out of my pay without telling me
  • How to complete your timesheet correctly (and preferably legibly)

The pay office is the first point of call invariably, and in most cases we have to redirect the employee back to their supervisor or bank or other area to establish some key facts first.  Minimise these queries, by including the steps they should take, such as talking to their supervisor about incorrect pays as the first step so they can ensure the timesheet was correctly submitted in the first place.

Incorrect bank account details can cause serious headaches and can be addressed with a simple explanation note on the bank details form, or by having employees attach a deposit slip or cancelled cheque to the bank form for verification.  When payments are rejected from bank accounts, it causes distress for employees and wastes valuable time that payroll officers could be utilising adding value to the payroll service.

Once you’ve established some vital information on your knowledge base that serves to eliminate pain points, go above and beyond and provide information that further empowers them, such as:

  • Contact details for the pay office, taxation departments, medical funds, superannuation providers, etc
  • Every single form an employee may need to access in their employment lifetime
  • Updates on legislative or procedural changes that directly affect them
  • New employee packages that explain what they need to know and do (and when they will get paid)
  • Nice to know information from superannuation funds, medical funds, employee share schemes, etc
  • If membership of any third party creditor comes with additional benefits, let the employees know (such as discount offers, insurance offers, etc)
  • Handy website links to government schemes or aide programs affecting your employees (in Australia: Paid Parental Leave, Lost Super, Centrelinks’ Emergency Assistance lines for employees suffering from environmental or personal emergencies and so on)
  • A listing of the coming years’ public holidays
  • Details of your Workplace Giving Program and why they should be a part of it
  • An invitation for feedback or ideas from your employees

What Information Would Managers Want?

Again, start with your pain points – yours and theirs.  Whatever causes grief, can be addressed by arming the right people with the right information.  From my experience, I have learned that these are the kinds of things that Business Managers want from payroll:

  • No noise or fuss (just get it done correctly, every time, and don’t cause me any fuss in the process)
  • A miraculous discovery of how to halve payroll costs (good luck with that one!)
  • Advance notice of any potential IR, ER, HR (and many more R’s) issues that may arise through payroll
  • Assurance that employees are paid compliantly
  • Assurance that the correct number of employees are being paid from the payroll system
  • Correct allocation of all costs associated with the payroll
  • Assurance that the correct amounts are paid for income tax, superannuation, payroll tax, workers compensation insurance, fringe benefits tax, etc
  • Assurance that correct termination entitlements are paid out to employees
  • To spend less time on payroll processing and payroll queries
  • To reduce the overall cost of payroll production
  • Accurate calculation and accumulation of leave liabilities
  • Timely reporting of significant dates (i.e. probation review expiries, special anniversary dates, etc)
  • Advance notice on legislative changes that will affect future payroll costs
  • Budgetary comparisons
  • Overtime, Absence and other payroll costs as a percentage of total payroll costs
  • Assistance with salary reviews via the simplest feedback system possible
  • Information of absenteeism that enables them to pinpoint people and favourite days and see the cost absenteeism is contributing to their bottom lines
  • Workers compensation reporting for submission of annual earnings data to insurance companies
  • Workers compensation reporting on highlights of current workers compensation payments
  • Key employee statistics (average age, years of service, mgt to production ratios, etc)
  • Payroll Issue or Error rates of business units (Name this report carefully in order to build business relationships)
  • If you are a Shared Services Business or Payroll Outsourcer, management want to identify ways to reduce the payroll processing fees (which you can counteract with brilliant service options to again increase them)
  • Effective head count reporting that provides:
    • an overview of the company divisional allocation
    • exact reporting of total employee number
    • alert management to non paid employees left sitting on the payroll
    • alert management to ghosts on payroll
    • highlight volume of new employees and terminations
    • show turnover rates

These are just a few of the things that management want from you.  All you need to do now is start answering these needs one by one.  Your goal is to understand the management teams’ WIFM – “What’s In it For Me” and create reports that are “decision drivers“.  If you haven’t already, learn about Business Dashboards and provide key metrics and statistics that management can easily interpret to know if action needs to be taken to implement improvements.

Talk to, and listen carefully to your management team and learn what information can be provided in value add reports that can drive their operating costs down.  If management discard your expertise at the outset, create the reports and deliver them anyway and managers worth their salt, who understand the numbers, will begin conversation themselves and your reports will come to have some impact.  Ensure you don’t send volumes of information out, as it won’t be welcomed.  Stick to short, sharp numbers and brief highlights of what the information is telling you (i.e.: Absenteeism in Department X is 78% higher than all other departments) to elicit calls to action from management.  The business should welcome your attempts to open discussion about improvement areas.  Word your highlights carefully, as you want to maintain and improve business relationships, not create enemies.

One major consideration in the gathering of data for management reports like these, is the ability of your payroll or HRIS system to extract the data easily and how you present the data.  If you know Microsoft Excel fairly well, you can create some great reports from pitiful payroll data extractions.

How Can We Serve Providers of Payroll Inputs With A Knowledge Base?

The key to providing a completely correct payroll service is the quality of the data inputs coming in to the process.  This information alone should be enough to convince you that the payroll team should partner with every contributor to the payroll process to ensure the quality of the inputs.

Help yourself by helping the administrators of payroll information to understand what the requirements are by giving them a guide that steps through the process from their perspective.  Outline the deadline requirements and explain in simple terms how it should be done.  Not everyone that processes timesheets for a business unit understands the complexities of payroll or industrial agreements.  They only know what they know, and that might not be enough to allow for a seamless payroll process.

Information in the “Administrators Guide to Payroll Processing” should also include helpful items such as:

  • Contact names and numbers of people they can reach for help
  • Payroll processing deadlines (including shut down periods and public holidays)
  • Frequently Asked Questions to enable them to handle simple payroll queries as the first point of contact for many employees
  • “How To” instructions on common issues or queries that they should be addressing
  • Identify common errors and omissions from administrators and let them know the impacts these have on the payroll process (nicely)
  • Any other information that impacts the quality data being delivered by them to the payroll team

What Other Information Would Our Customers Want?

To find out what your customers want to know, there are two simple steps to take.  Firstly, you ask them!  You can ask your employees, managers and other customers what information would help them and then work to provide it.

Sometimes, people do not really know what product or service they need, but have a problem that needs a solution, so secondly, you listen to them.  Listening to your customers should be a systematic, daily process that is built into your personality, let alone your daily functions.  One persons’ anguish or confusion could result in another valuable piece of information that many others could utilise.

Building a Knowledge Base for the Payroll Team

To achieve our end goal of providing a compliant, correct, on time payroll, we need to arm our Payroll Team with the knowledge they require to achieve that end goal.  So many payroll teams operate from disjointed processes that usually vary between payroll officers.  They’ve collected bits and pieces over time and invariably the loss of a payroll officer from the team also results in a loss of valuable knowledge of the intricacies of the process.

To ensure the preservation of organisational knowledge and the competence of your payroll team as a whole, invest your time in collecting, documenting and publishing vital information such as:

  • Documented payroll processes, checklists and deadlines
  • Orientation or induction program contents
  • Master forms used in the payroll process
  • Policies and Procedures relating to payroll processing
  • Legislation and Employment Agreements/Industrial Instruments that relate to your organisation
  • How To Guides (How to Calculate Tax on Termination, How to Pay Upon Death of an Employee, etc)
  • Tax rates and calculators that you need to perform all of your tasks with
  • Links to helpful sites that provide additional information
  • Answers to everything they need to know to serve your customers at their best

How Do We Actually Get People to Start Using the Knowledge Base?

Once you’ve created your knowledge base, the next step is to ensure you drive people to use it.  You have to promote it and refer people to it regularly…  If people ring with questions, you can refer them to the knowledge base on the intranet (or a document that you can email them) and walk them through it.  Over time, this will encourage people to use the knowledge base as their first point of call, until the time comes when your queries start with this conversation – “I’ve just searched the knowledge base and I couldn’t find any information on …”

Encourage your own team to utilise the knowledge base by eliminating all other sources of personal notes and individual processes and holding your payroll teams’ knowledge in the central knowledge base (in print or online format).  Every time someone has a question, a chorus of voices should either say “It’s in the knowledge base!” or “That needs to be in the knowledge base!”

Let’s Get Started Then…

To assist those of you following this series, I’ve opened a conversation on the Linkedin group “The Professional Payroll Manager” and welcome questions, comments or suggestions on the discussion board, so we can all work together to improve our global payroll world.

If you have any questions you would like to raise personally, please email Louise Vidler at The Professional Payroll Manager.

© 2012 Louise Vidler T/As The Professional Payroll Manager.  All rights reserved.

All materials contained on this web site not otherwise subject to copyright of other parties are subject to the ownership rights of Louise Vidler T/As The Professional Payroll Manager. Louise Vidler T/As The Professional Payroll Manager authorises you to make a single copy of the content herein for your own personal, non-commercial, use while visiting the site. You agree that any copy made must include the Louise Vidler T/As The Professional Payroll Manager copyright notice in full. No other permission is granted to you to print, copy, reproduce, distribute, transmit, upload, download, store, display in public, alter, or modify the content contained on this web site.

March 8, 2012

12 Best Practices to Totally Transform Your Payroll World


ppm logo - Edited (2)

My recent articles have aroused passionate discussion and poignant feedback from the payroll industry globally. Overwhelmingly people claimed that payroll as a function is held in low esteem and many who perform the often-thankless task, are not deemed professionals by those that employ and manage them.

Crystal balls and magic payroll buttons aside, the question left at the end of the day is “How do we turn the tide?” Well here’s how! If we utilise all of our previously unobserved knowledge to deliver first-rate value add products, services and insights for employees, business managers and other stakeholders, there will be a paradigm shift. Guaranteed! People will begin to acknowledge the complexity of payroll and come to value the true worth of our knowledge.

Mahatma Ghandi said “Be the change you want to see in the world.”. So let’s do it payroll professionals! Let’s be, and lead the change!

Reading the Linkedin and other feedback from the “magic payroll button” article left me saddened more often than not. There are people who have committed to getting the job done through hell and high water for as much as 40 years and still feel that no-one truly understands the effort or personal commitment it takes to get the job done. We endure late nights, miss out on our family and postpone life. Many of us are refused leave at Christmas time and work public holidays year in and year out.

At the other end of the spectrum, there seems to be an abundance of those same payrollers with an absolute sense of humour and the ability to brush off the negative, step up and say “OK! What’s next?”

So here it is! Here’s the “What Next”. Over the coming 12 weeks, starting on Monday, I’m delivering a payroll innovation per week for you to implement. To some of us, these are hardly innovative, but every time I’ve stepped into an organisation, many of these are usually the first steps I take to quickly turnaround the perception of the service. They are easy wins. Take 12 weeks or 12 months to implement these ideas, it’s your call, but you will begin to live in a new world when you start to move down this path.

The 12 payroll innovations were selected to not only highlight your expertise to all “customers” of the payroll service, but also as they are key areas for time and cost efficiency gains and they will see you on your way to delivering service excellence. Any decent benchmarking program will focus on these areas as measurables. Here’s the list of the 12 innovations that are coming (and not necessarily in the same order):

1- Creating a knowledge base (for employees, managers, administrators and your payroll team)
2- Give your employees a “pay rise” by implementing programs with tax advantages
3- Becoming a vital information resource for Business Units and Finance
4- Creating a seamless New Employee Process for the whole organisation
5- Identifying and eliminating pain points for your team and customers
6- Creating valuable services and staff benefits via your third party creditors
7- Implementing error rates analysis to reap the rewards of superior service and cost and time efficiencies
8- Automation 101 – The Essentials of Automating Payroll Processes
9- Utilising Your HRIS or Payroll System for all its worth
10- Extracting the absolute maximum out of a limited training budget
11- Creating functional masterpieces with excel
12- Restructuring your payroll processes to create efficiency gains and service specialisations

While you await the first article, I will intoduce you to author Ron Kaufman and his book “Up Your Service!”. It’s an absolutely brilliant game changer! I came across this book years ago and now it’s a well worn management tool. Do yourself a favour and sign up for the Up Your Service! Insights newsletter at http://www.RonKaufman.com At the very least.

Ron explains the term “perception points” and how to radically shift other peoples’ perception of us by spending some quality time analysing our perception points. He does this in the easiest to read, bite sized and palpable chunks. If you are not converted by page 5, I’ll be surprised. In a rather large nutshell, the book tells us, if we didn’t realise already, that we have to accept some of the responsibility for how we are perceived. Absolutely every tiny detail we present to the world matters!

Step one in changing others perception of ourselves, is to look within and to examine what we are projecting. With the Up Your Service! book in hand, you will be keen to scrutinise yourself carefully, your team and your physical surroundings. You will understand the absolute importance of ensuring total professionalism in the end product of your services and begin to look at everything from the perspective of your customers service experiences and their five senses.

The whole concept of Ron Kaufmans “perception points” is that every time someone experiences a sight, smell, taste, sound or a feeling they are perceiving and your job is to ensure the perception you aspire to.

To begin the process, stop being the payroll manager for a moment, put your customer hat on and start observing your service. Stand at the entry door to your pay office and be your customer. What do you see? What do you hear? What do you feel? Is your office or workspace organised? Are your people welcoming? What do people get to physically see and touch from you? Does it make you proud? Cringe? Or just acknlowledge that it could be a little better?

Are your emails professional? Do you have forms that look like they’ve been photocopied a trillion times over the last 20 years? Are there archive boxes, filing and enough piles of paper around your office to give your Safety Representative a heart attack? Does everything you present say we are professionals and we are proud of our work?

Listen to the phone calls and empathise with the person on the other end of the phone. Attempt to understand if there is a deeper layer of concern to the questions being asked or objections being put forward. Are you and your team providing superior service or are you simply telling customers to buzz off in the nicest possible way? How do you show them that you actually exist to serve them?

To stand up and be noticed, we need to be someone of worth, or do something of worth. It’s time to change the course of history and start putting payroll on the corporate agenda… but it’s up to us to work on changing our world from the inside before we can start expecting the slightest change of mindset by a majority of those on the outside.

Join us on the journey by following this blog (top left of this page) or joining The Professional Payroll Manager group on Linkedin and each Monday your next step will be in your Inbox. I would love to have actual conversations along the way about your successes, your issues and any ideas and questions you want to share.

I am also trying to purchase bulk copies of Ron Kaufmans books, so if you would like to purchase through me via paypal, message me at any of my social media contacts and I’ll keep you posted when I’ve received a definitive reply.

(C) 2012, Louise Vidler

Follow on Twitter @louisevidler
Join the discussion via Linkedin group: The Professional Payroll Manager

%d bloggers like this: