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Is Your Recruitment Agency Ready for Single Touch Payroll?

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One of the most important legislative changes to impact Australian organisations in decades is Single Touch Payroll (STP). All companies with more than 20 employees will be required to comply as of 1 July 2018, and with fewer than 19 employees the following year pending Parliament legislation. Yet according to Shortlist, many recruitment agencies either aren’t aware of the forthcoming change or don’t know how to prepare. So what exactly is STP and what does it mean for your agency?

What is Single Touch Payroll?

STP is a reporting change for employers. Currently, they’re required to report payments to employees (such as wages, super information, and pay as you go (PAYG) withholding) to the Australian Tax Office (ATO) either monthly or quarterly. The new legislation will mean employers will send payroll information directly to the ATO from their payroll or accounting software, at the same time as they pay their staff. The idea is that the whole process will be streamlined and there will be better access to data for all parties involved.

When does it take effect?

If on 1 April 2018 you had 20 or more employees, you fall into the category of “substantial employers” and will need to start reporting through STP from 1 July 2018. If you have between 1-19 employees, the process begins on 1 July 2019, subject to legislation being passed in parliament.

What does your agency need to do?

When the legislation comes into force, you’ll be using your payroll solution—the accounting, business management, or payroll software you use to manage payments to your employees—to report directly into STP. Therefore, you need to make sure that it’s updated in order to comply.

If your agency manages its own payroll, your software may require upgrades in order to report directly into STP. Agencies that invested early in products that comprise specialised components hosted in a cloud network have a distinct advantage since this makes it easy to roll out updates with minimal adverse impact. Each time new legislation is brought in, cloud-based solution users only need to replace the affected component. Unfortunately, those using older end-to-end systems for their payroll processes will face overhauling their entire systems.

If you use an outsourced payroll technology provider, talk to them to ensure their existing solution supports the changes or that they can provide a cost-effective method to deal with the new regulatory requirements. Additionally, the new legislation dictates that technology companies providing payroll systems must be ISO compliant in order to communicate data to the ATO via their web service, so check that yours is.

The process of switching to a new payroll system can be time-consuming and the changes have the potential to significantly disrupt your business, so it’s vital to take action now to assess the impact these new regulatory changes will have on your business.

What happens if I don’t get ready in time?

If you think your payroll solution won’t be ready for the deadline, you (or your service provider) can apply to the ATO for a deferral in some circumstances. But you must produce a plan explaining how you’re working toward compliance. After a 12-month grace period, fines will apply if agencies still fail to comply. Consequently, transitioning away from an existing payroll provider that’s unable to comply with the new legislation in time might be the solution.

Don’t leave it until it’s late: start asking the necessary questions to find out how well-prepared your agency is for the new regulatory change. Take expert advice from a third-party service that provides payroll software. And bear in mind that the recruitment sector is facing more impact from new legislation than ever before: you only have to consider the changes to labour hire laws and 457 visas. It makes sense to proactively prepare for further changes and focus on how your agency can be more agile and nimble in the face of continued change.


Curious about how other upcoming legislative changes may affect your agency? Check out the article, What Do Changes to the 457 Visa Programme Mean for Your Recruitment Agency?to learn more.