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Payroll Management System: The Ultimate Guide

Published: 8 December 2022

Payroll Systems

Processing payroll is a critical part of running a business in Australia. While it may not be the most exciting job for many owners, it’s an essential duty nonetheless. Staying on top of business payroll allows everyone on your team to get paid the correct amount and always on time. However, the payroll process can be repetitive, mundane, and time-consuming. If you run a company with many employees, the payroll process can also get complicated.

An effective payroll system enables you to run payroll quickly and efficiently. By spending less time and effort on payroll, you can focus on other more pressing business needs. In this article, you will learn what a payroll system is, how payroll is done, and how your business can benefit from a payroll process. Use this to learn more about how to set up payroll, or skip to any section by using the links below.

What is payroll?

Running payroll refers to the process of compensating employees for their work. Every payroll period (a recurring length of time over which employees’ time is recorded and paid for, such as weekly or monthly), an employer must calculate and distribute employees’ wages. 

The employer is responsible for accurately adding up the hours an employee worked and calculating their gross wages. Employers are also tasked with making deductions for local and federal taxes, social security, unemployment insurance, and more. Then the company must disburse paychecks to employees on payday.

As you can imagine, this process can get hectic and time consuming quickly. For the sake of time and convenience, most business owners find ways to avoid running payroll themselves. Typically, they either set up an in-house payroll system or outsource payroll to a company or advisor. 

Payroll could include the following: 

  • Employee time and attendance data 
  • Employee gross wages
  • Employee taxes 
  • Annual leave accrued 
  • Long service leave 
  • Parental leave
  • Superannuation contribution
  • Salary sacrifice arrangements
  • Fringe benefits
  • Termination payments 
  • Allowances 
  • Reimbursements

Payroll process: step-by-step 


While transferring money from an employer to an employee may sound simple, there are important aspects to be taken into consideration. Following a consistent payroll process for every employee can help minimise errors and keep your business compliant with relevant tax laws. The payroll process for most businesses can generally be broken down into eight essential steps:

  1. Determine your payroll system
  2. Establish a payroll policy
  3. Collect employee information
  4. Set up direct deposit
  5. Implement a time tracking system
  6. Review employee timesheets
  7. Approve and submit payroll

Create and save payroll records

As you can see, there are more steps to running payroll than you may expect. However, after you do the upfront work of setting up a payroll system, the process becomes much simpler.

Types of payroll systems


Setting up a payroll system helps to ensure that payroll gets done accurately and on time. With an efficient system in place, companies can better manage payroll. The last thing you want as an employer is for your team to have problems with their paychecks. Every employee expects to be paid the amount they’re owed on payday. 

So what is a payroll system? As far as what a payroll system looks like, companies have a few different options. Many companies use the following different types of payroll systems in Australia to manage employee compensation.

In-house payroll

Some companies set up an internal payroll process that must be completed manually every pay period. With this method, either the business owner or a Human Resources (HR) employee is directly responsible for running payroll. While this can be an economical option for small businesses, it can be hard to sustain once your team grows.

Full-time accountant

An accountant is a financial expert who can run payroll and file tax forms on your behalf. Outsourcing payroll management to an accountant can provide you with helpful support. They can take care of the payroll process from start to finish and give you advice and insights along the way.

Payroll service 

Payroll providers are companies that specialise in running payroll for other businesses. They offer various payroll services, from time tracking to filing taxes on your company’s behalf. Generally, payroll providers charge a flat fee per month or payroll run.

Payroll software 

With specialised accounting and payroll software, you can automate payroll processing entirely. One benefit of software solutions is that they minimise the risk of human error. Plus, payroll and HR software programs can usually generate detailed payroll reports and payslips for each pay period.

3 reasons why a payroll system is essential

Payroll is a necessity for every business, no matter how big or small. Having effective Australian payroll systems can ensure everyone on the team gets their proper paycheck on time. While a payroll system can benefit employees, it’s also a great asset for employers. Below, we’ve listed just a few reasons why it’s essential to have a payroll system in place for your business.

  1. Save time: A payroll system can help you streamline the payroll process. Manually adding figures, entering data, and calculating taxes can be time-consuming. A payroll system allows you to spend less time on payroll and more time running your business.
  2. Boost employee satisfaction: Your employees are going to want to receive the wages they’re due come payday. A payroll system helps to ensure employees are paid the correct amount on time.
  3. Tax compliance: One of the most difficult parts of processing payroll is accounting for tax withholdings. Each pay period, deductions need to be made for taxes, Medicare, and so on. Failing to account for employment tax deductions can land your company in trouble with the ATO. A solid attendance and payroll system will make any necessary tax deductions or garnishments so that your company stays in compliance.

Benefits of a payroll system

Full-service payroll providers and payroll software offer unique advantages over other payroll solutions. Here are just some of the benefits that come with these particular payroll services:

  • Save money: Pricing is one of the most important considerations for many small business owners. Hiring in-house payroll managers or an accountant can be expensive. However, with a payroll provider, you typically pay a flat monthly fee, making it a cost-effective option in the long run – also bringing costs down when collaborating with your accountant.
  • Automate payroll: When you use payroll software, you can automate most aspects of the payroll process. In this case, following initial setup, you can run online payroll in a matter of clicks each pay period.
  • Minimise errors: When you run payroll manually, all sorts of human errors can occur. These errors can result in employee dissatisfaction or tax non-compliance. Cloud payroll software can complete complex calculations in no time, saving you time and minimising risks.


  • Access anywhere: Almost every payroll software has a website or mobile app, so you can access payroll data anytime, anywhere. Many also offer employee self-service portals that allow your workers to track their hours and view HR data on the go. 


  • Stay compliant: Single Touch Payroll (STP) is the method by which employers must submit tax and super information to the Australian Taxation Office (ATO). Single Touch Payroll Phase 2 was introduced in January 2022 and it is important employers follow regulatory requirements to prevent non-compliance.

How to choose a great payroll system


No two payroll systems are the same, so it’s important you do your research before choosing a system. Here are a few things to look for:


Cloud software: ensure that you can make a pay run seamlessly anywhere, anytime.

  • Features: do your research on the features you need to best support your business; for example, automatic award rate calculations, or self-service apps for employees to manage leave etc.
  • Affordability: You want a service that is value for money when comparing against the features you need; costs will vary pending the features available. It’s also worth considering whether you want to pay monthly or be locked into annual contracts. 
  • Compatibility: You want a payroll service that works with the programs you already use, like time and attendance and accounting systems.
  • Customer service and support: Ensure the system you choose gives you access to great support when required.
  • Law compliance: Make sure your payroll service is compliant with local tax laws, including Single Touch Payroll.
  • Employee award rates: Ensure it is compatible with award rates - particularly important when managing casuals or contractors. 
  • Flexible: If your business grows, will your payroll system scale with you?

Why choose QuickBooks Payroll

If you run a small business—or any business—setting up a payroll system is essential. A payroll system makes it easy to accurately compensate your team on time. And these days, more and more companies are beginning to automate the payroll process. 

With software like QuickBooks Payroll powered by Employment Hero, you can save time and minimise errors at an affordable price point. With our payroll software, you can set up automatic payroll so it runs in the background for each pay period. Our online payroll software also provides tax penalty protection, free direct deposit services, and automatic payroll tax filing. 

Key features include: 

  • Employee portal to manage staff leave and payslips
  • Employee mobile app
  • Timesheets
  • Single Touch Payroll reporting
  • Automated super payments
  • Leave management
  • Award rates
  • Rostering
  • Time and attendance tracking


QuickBooks Payroll accounting software allows you to: 

  • Keep your accounting simple by linking your accounts and storing all the important information in one place.
  • Pay your employees and contractors properly and on time.
  • Use features such as time-tracking and an attendance system.
  • Stay up to date on the most recent changes to tax codes and payroll rules.
  • Keep IT costs down by running all of your accounts from one place.
  • stay compliant with Single Touch Payroll and other government requirements.
  • Automate payroll, with automatic calculations for each pay run for deductions, such as tax and Superannuation


As a business owner, you likely want to spend as little time on the payroll as possible, yet the job needs to get done right every time. Stay on top of employee compensation by choosing the best payroll software for your company.

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