Payroll is one of the most important functions in any organisation. Employees expect to be paid correctly and on time, while regulators expect businesses and not for profits (NFPs) to comply with complex workplace and taxation requirements.

For small NFPs and professional service firms, payroll can become particularly challenging. Limited resources, changing award rates, grant-funded positions, part-time staff, contractors, and evolving compliance obligations all increase the risk of mistakes.

According to the Fair Work Ombudsman, more than $358 million was recovered for over 249,000 underpaid workers in Australia during the 2024–25 financial year alone. This reflects how common payroll errors remain across organisations of all sizes.

For NFPs, payroll mistakes can affect donor confidence, grant funding, and board governance. For professional service firms that bill clients by the hour, inaccurate payroll data can distort profitability and resource planning.

WHY PAYROLL ACCURACY MATTERS MORE THAN EVER

Since January 2025, intentional wage underpayments can result in criminal penalties under Australian workplace laws. While genuine mistakes are treated differently, organisations are still expected to take reasonable steps so that employees receive their correct entitlements.

For charities and NFPs, accurate payroll records also support transparent financial reporting. Registered charities must submit annual reporting to the Australian Charities and Not-for-profits Commission (ACNC), and many are required to lodge annual financial reports alongside their Annual Information Statement.

COMMON PAYROLL MISTAKES TO AVOID

Misclassifying Employees and Contractors

While engaging contractors can provide flexibility, the distinction is not always straightforward. Misclassification can lead to unpaid superannuation, leave entitlements, Pay As You Go (PAYG) withholding obligations, and potential penalties.

Professional service firms often engage freelancers, consultants, or project-based workers. NFPs may hire grant-funded specialists on temporary arrangements. Before onboarding workers, review the employment relationship carefully and seek professional advice from accounting firms in Sydney where needed.

Applying Incorrect Award Rates

Australia’s award system can be complex. Employees may be covered by different awards depending on their role, responsibilities, and industry.

NFPs frequently employ staff across multiple functions, including administration, community services, fundraising, and program delivery. Professional service firms may employ administrative, technical, and support staff covered by different employment arrangements.

Regularly reviewing award classifications and wage rates helps secure employees’ correct pay and entitlements.

Overlooking Superannuation Obligations

Superannuation errors remain a common issue for small organisations. Mistakes can include:

• Incorrect contribution calculations
• Missing payment deadlines
• Failing to pay eligible workers
• Incorrect treatment of contractors

A robust payroll review process can help identify discrepancies before they become larger compliance issues.

Poor Record Keeping

Missing timesheets, leave balances, employment agreements, and payroll reports can make it difficult to demonstrate compliance if questions arise later.

For NFPs, strong record keeping is particularly important when preparing reports for boards, auditors, donors, and funding bodies. Good payroll records should be accurate, up to date, securely stored, and easily accessible when needed.

Failing to Reconcile Payroll Regularly

Some organisations process payroll each pay cycle but rarely review the overall data. Regular reconciliation allows businesses to compare payroll reports against bank payments, general ledger accounts, superannuation liabilities, and leave provisions.

For professional service firms operating on a bill-by-the-hour model, payroll reconciliation also provides greater visibility into labour costs and profitability.

PAYROLL TIPS FOR SMALL NFPS

1. Create Clear Grant-Funded Payroll Tracking

Many NFPs employ staff whose salaries are funded by specific grants. Separating payroll costs by funding source can simplify grant reporting and reduce administrative headaches.

2. Prepare Board-Ready Financial Reports

Boards and funding bodies increasingly expect clear financial reporting. Payroll data should align with budgeting, forecasting, and operational reporting requirements. Professional not-for-profit accounting services help strengthen payroll information for effective governance and decision-making.

3. Maintain ACNC Reporting Readiness

Accurate payroll records make annual reporting much easier and help meet compliance obligations throughout the year. Many NFPs benefit from specialised accounting for not for profits and bookkeeping for not for profits to handle the unique reporting requirements of the sector.

4. Scale Resources During Peak Periods

Payroll workloads often increase during grant application periods, fundraising campaigns, and year-end reporting cycles. Rather than hiring permanent staff for short-term needs, some NFPs utilise flexible finance resources to manage fluctuating workloads efficiently.

PAYROLL TIPS FOR PROFESSIONAL SERVICE FIRMS

1. Track Time and Payroll Together

For businesses that bill clients based on hours worked, payroll and time-tracking systems should be closely aligned. Accurate timesheets improve:

• Client billing
• Staff utilisation reporting
• Resource planning
• Profitability analysis

2. Review Labour Costs Regularly

Labour is often the largest expense in a professional service business. Regular payroll reviews with accounting services for small businesses can help identify trends, manage margins, and support strategic planning.

3. Leverage Technology

Modern payroll platforms can automate many manual processes, including award updates, leave calculations, Single Touch Payroll reporting, and superannuation obligations. The result is greater efficiency and reduced compliance risk.

4. Work With Industry Specialists

Different industries face different payroll complexities. For example, accountants for medical practices may need to manage varying employment structures and award requirements. Accountants for IT professionals often support businesses with contractors, remote workers, and project-based teams.

Industry-specific expertise can help organisations avoid costly mistakes while improving operational efficiency.

WHEN TO CONSIDER OUTSOURCED PAYROLL SUPPORT

Many small businesses and NFPs simply do not have the internal resources to manage increasingly complex payroll requirements. Partnering with experienced finance professionals can provide:

• Improved compliance
• Better reporting visibility
• Reduced administrative burden
• Access to specialist expertise
• Greater confidence during audits and reviews

For NFPs, not-for-profit accounting services can help align payroll, grant reporting, and governance requirements. For professional service firms, payroll support can improve visibility into labour costs and overall business performance. This allows their internal teams to focus on strategic priorities.

MULTI-AWARDED OUTSOURCED ACCOUNTING SERVICES IN SYDNEY

Whether you’re managing a growing charity, a healthcare practice, an IT consultancy, or another service-based organisation, investing in accurate payroll processes is essential.

At Keeping Company, we help organisations simplify payroll, bookkeeping, and financial management. From not-for-profit accounting services to outsourced accounting services Sydney businesses rely on, our team provides expert guidance designed to help NFPs and small businesses stay compliant, efficient, and focused on what they do best.

If you’d like greater visibility over your payroll and financial processes, contact us to learn how we can support you.

The material and contents provided in this publication are informative in nature only. It is not intended to be advice, and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

Ryan Miller is the founder of Keeping Company, May 2011 – Present. A tie-loathing, people person with an entrepreneurial spirit. Ryan’s drive to modernize the accounting industry coupled with his desire to help people succeed saw the birth of Keeping Company. Focusing on the SME space, KeepingCo. empowers business owners by providing high-quality end-to-end accounting and business advisory services.

Ryan took his first Accounting role working at KPMG. He went onto further refine his skills as a Chartered Accountant taking the role of Director of a Chartered Accounting firm in Erskineville.

Ryan is a fully qualified Chartered Accountant and a member of the Institute for Chartered Accountants Australia and New Zealand. He is also a Registered Tax Agent and holds a Bachelor of Commerce from the University of South Australia.