What types of considerations may assist when seeking to pay your church team correctly and on time? In this article, we explore some broad thoughts in term of: structure and setup; allowances and benefits; and compliance and communication.
Structure and Setup
As you may have experienced, your church payroll can be complicated and time-consuming. Getting it wrong or paying staff late can be difficult for the team, and potentially lead you into unexpected backlogs or corrections.
Key to you having a good payroll system is ensuring that your payroll system is set up and configured correctly.
Depending on what system you are using, there may be a number of important configurations to attend to, including:
- creating correct payroll calendars, cycles and procedures
- setting up the payroll components of your general ledger to give you the tracking and information you need
- mapping your default payroll accounts correctly
- setting up all your pay items (with the correct configurations of PAYG, superannuation, and BAS reporting) to support your payroll structure
- setting up your leave items (for example annual leave, personal leave, long service leave) to match with your local leave management preferences
- setting up superannuation in your system
- setting up and reviewing your Single Touch Payroll
Then build each employee into the system, including:
- Employee details and contact information
- Employee pay cycle
- Taxation and employment basis
- Leave accruals and balances
- Employee bank account(s) for net pays
- Standard pay template (capturing their pay structure)
- Superannuation accruals
And remember to collect the relevant documents you’ll need from each team member – in the areas of employee details and contracts (where relevant), Tax File Number information, Superannuation Fund information – as well as advising employees of any obligatory Fair Work information.
A special note on Long Service Leave – Long Service Leave (LSL) in your church may be one of those things that tends to get put in the “too hard basket”. It’s difficult enough to track LSL in a standard business, but you are probably aware of some of the additional difficulties you may face:
- LSL arrangements can be different for your individual team members (ordained / non-ordained)
- LSL for some of your team can be transferable from one employer to another (in some circumstances)
- your LSL calculations may not be handled well by automatic payroll systems (due to the complexity and components of your payroll structures)
To ensure Long Service Leave gets the attention it needs, you may find it helpful to put in some additional steps like:
- monitoring a regular cycle of when your LSL obligations are to be updated
- calculating your LSL liability for each of your employees, based on their employment type and the employment arrangement you have with them
- updating the general ledger of your accounting system to reflect your updated LSL liabilities
- keeping a record of your LSL calculations
Having your church’s LSL obligations tracked in this way will help you avoid nasty surprises with liabilities you didn’t know you had. It will also allow you to have more prudent cash flow management, as your updated liabilities will regularly reflect in your church reports.
Allowances and Benefits
When it comes to the payroll for your ministry staff, there may be added dimensions that can be unfamiliar, even to experienced payroll officers. Things like:
- the interaction between your local and centralised payroll components
- tax-free elements in your remuneration packages
- complex salary sacrifice structures for your team
- multiple different and unusual arrangements for your employees
But perhaps top of the list of challenges is effectively understanding and administering the allowances and exempt fringe benefits of your pastors and ministry staff.
(As a quick side note, there are different terminologies that churches use for the non-taxable part of a ministry remuneration package – Non-Cash Benefits (NCB), or Non-Reportable Fringe Benefits (NRFB), Salary Sacrifice, or Ministers Expense Allowance (MEA) or the like. For the sake of consistent reference, we’ll use the terminology Ministers Discretionary Benefit Allowance (MDBA) in this document).
As you may know, there are many different ways to structure the MDBA part of a minister’s package. Minister’s Expense Allowance (also known as Non-Cash Benefits (NCB), or Non-Reportable Fringe Benefits (NRFB)).
Some of these structures can be quite complex and potentially confusing – but there may be ways to simplify the administration of your church’s MDBA – so it could be good to begin by reviewing your current MDBA structure to investigate whether there could be ways to create more clarity.
Once this is settled, and the MDBA package for each team member is understood, you can then move to:
- setting up your MDBA in your general ledger and in your payroll system
- developing and monitoring your workflows for MDBA accruals, claims and payments
- accounting for GST on your MDBA claims and ensuring this is correctly coded in your system
- regularly aligning your MDBA accrual records with your funds held for MDBA amounts owed
Perhaps your team would also like regular updates on the history and balance of their MDBA. In this case you can also send regular reports to your individual team members so they are kept informed and up-to-date.
Having your MDBA system set up and running smoothly like this can greatly reduce the time spent on this by both you and your employees. And more importantly, the resulting accuracy avoids the confusion and frustration of not having MDBA clear for the team and overpayments or errors that can flow from this.
Compliance and Communication
Thinking about your church, we believe there are three things that your whole team will appreciate when it comes to your regular pay run:
- having your pay run done accurately and on time (including updates)
- having other compliance aspects of your payroll kept up to date
- having regular and ad-hoc information available for personal budgeting or external bodies
Let’s consider each of these briefly.
When it comes to your regular pay run, a starting check list on the various aspects may include step such as:
- process the regular pay run in your payroll system each period (including any updates)
- where available, upload net payroll payments to your online banking for authorisation
- record and review, as relevant, leave transactions (Annual Leave, Personal/Carers Leave, Long Service Leave, Other Leave)
- review and update any salary sacrifice arrangements you may have
- process time sheets (if you use these)
- process irregular or corrective pay runs
- issue payslips to your employees for each of your pay runs
- ensure that your PAYG liabilities are calculated and recorded
- ensure that your Superannuation liabilities are calculated and recorded
- file your Single Touch Payroll (STP) obligations
Having your regular payroll up to date will really help you and your employees out at the end of the financial year. Your employees will have their STP information ready for them promptly and they won’t have to chase you for it when they are ready to lodge their personal tax returns.
When it comes to other payroll compliance, you may find it helpful to double check you have the following items scheduled for processing:
- Payslips for your team (as mentioned above)
- Superannuation regularly reconciled and remitted (usually monthly or quarterly)
- PAYG remitted to the ATO (as part of your BAS / IAS lodgement)
- Single Touch Payroll (STP) regular and annual filing
Finally, from time to time, your team may be wanting information about their historical payroll or need some other sort of documentation for a bank, real estate agent or government body. By using good systems and processes, you can produce for your team a wide variety of payroll reports or documents that they may need – and you’ll be glad that you have everything sorted.
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