The tedious task of paying your staff has leapt from a manageable smoulder to a five-alarm fire. Last year, the Australian Government, through the Fair Work Ombudsman, moved to criminalise wage underpayment, defined as intentionally underpaying wages and superannuation. Employers found guilty can be fined and even imprisoned.

A similar ‘wage theft’ bill was considered by the New Zealand Government and then rejected. It threatened business owners with up to one year in prison.

The problem for business owners is that incorrectly paying wages is shockingly easy to do. Cases of underpayment regularly pop up in the news. From the Australian conglomerate Woolworths to a MasterChef judge and chef George Calombaris, who founded hospitality group Made Establishment, they have found themselves defending their reputation against what they claim was an honest mistake.

In 2020, most of Calombaris’s 12 restaurants and food venues in Melbourne were put into voluntary administration. At the time, his company employed more than 500 people, from waiters, chefs and other kitchen professionals to cleaners and support staff. The wages and superannuation equalled about A$7.8 million.

The reality is that most businesses are trying to pay their employees correctly, says John Cuthbertson FCA, CA ANZ’s tax and financial services leader.

“In New Zealand, the Holidays Act is so complex around people working variable hours or part-time employees that most people struggle to get it right,” says Cuthbertson. “Embarrassingly, the actual ministry that looks after workers, they themselves got caught out.” And the process of running payroll is set to become even more onerous.

From 1 July 2026, companies in Australia will need to pay superannuation at the same time as salary and wages. Fair Work has redefined what it means to be a casual employee, and superannuation payments will be deemed late based on the date they arrive in the employee’s account, rather than the date the company made the payment.

In New Zealand, payroll may be simplified by reducing the number of calculations for hours worked and sick leave.

The 2024 Power of Automated Payroll Report by HR and payroll suite Employment Hero revealed more than 95% of payroll professionals take three days or more to complete a pay run. General manager of payroll, Phil Bernie, says paying staff still takes “a significant amount of time and resources.” In February 2024, the report surveyed more than 1000 accountants, bookkeepers and payroll professionals across New Zealand and Australia.

Squeezed between Byzantine law and government crackdowns, it’s little wonder that businesses consider payroll software an essential part of their software stack.

“We get a lot of clients coming from other accountants and find that they have got three to four years’ worth of annual leave calculated incorrectly for this employee. There could be a major cost when they try to untangle it.”

How would you like to pay?

The payroll software market falls into three categories:

1. Basic payroll built into small business accounting software
2. Standalone payroll applications built to solve the complexity of employment legislation
3. Integrated HR and payroll suites that centralise employee information and management into a single database.

All the major accounting software companies provide a payroll module capable of handling full-time employees. Xero, MYOB, and QuickBooks integrate with the ATO and provide payroll activity summary reports, but they lack award interpretation and complex time tracking. All three charge a per-employee fee for payroll and pull timesheet data from apps in their respective ecosystems.

Reckon Accounts is popular with microbusinesses because it charges a flat A$12 monthly fee for payroll for four employees, or A$25 a month for unlimited employees. However, the payroll process is less automated and requires more manual steps than its larger competitors.

Standalone payroll apps are extremely popular, particularly in New Zealand. Notable brands include Access PayEasy, Astute Payroll, iPayroll, and Smart Payroll.

IPayroll, which launched in 2001 and claims to be New Zealand’s leading online PAYE Intermediary (PI) with IR, processes gross payrolls of over NZ$4.5 billion per year for thousands of employees.

Its subsidiary, CloudPayroll, operates successfully in the Australian market. Several Australian payroll companies have tried to make the return journey, only to flounder on the jagged reefs of Kiwi employment law.

“Some of the Australian payroll providers don’t appreciate how complex the legislation is. They think they can just roll their system that they’ve been using in Australia out to New Zealand and make some tweaks. But there have been instances where that’s gone wrong,” Cuthbertson says.

In fact, CA ANZ itself was vetting a payroll provider and found mistakes in the software company’s numbers. This was despite the fact that the company in question had been operating in New Zealand for some time.

Steven Wong CA, head accountant at BetterCo, manages payroll for several hundred clients, the majority of which are on iPayroll. He says that the Holidays Act costs corporations millions of dollars in fines and redress to underpaid employees.

“All these errors are costing hundreds of millions of dollars a year because no-one can get annual leave correct. Nobody gets sick leave right,” Wong says.

“We get a lot of clients coming from other accountants and find that they have got three to four years’ worth of annual leave calculated incorrectly for this employee. There could be a major cost when they try to untangle it.”

Wong also uses Xero’s payroll and Smartly, another New Zealand payroll provider. Xero stands out for its broad ecosystem of applications and the ease of use of working within your accounting software. However, it usually falls short for New Zealand businesses.

“We try not to recommend Xero as often as our Australian office does. Xero payroll is more refined there. But in New Zealand, because of the Holiday Act, it’s so hard to get payroll right.”

One omission is the lack of a dedicated helpline for payroll inquiries. Xero directs accountants to its online help portal and email support, which can take two to three working days to respond – too late to sort issues on payday, Wong says.

Another drawback is that if you need to amend a historical pay run in Xero, you have to revert to the intermediate pay runs to fix it.

Xero also doesn’t automatically pay employees and IR. IPayroll and Smartly are payroll intermediaries that direct-debit wages and taxes from the company’s bank account and transfer funds to employees and IR respectively. Both applications automatically calculate wages based on awards and the Holidays Act.

“If the client has engaged us to run payroll, we need to go into iPayroll and hit three buttons,” Wong says.

The pay run is not smooth every time, he adds. For example, circumstantial items such as maternity leave may need to be manually updated before the pay run. The main downside of standalone payroll software is the cost. “They’re much more expensive than Xero,” Wong says. “But there are no other cons. They are professionals in payroll; they do it well.”

“In New Zealand, the Holidays Act is so complex around people working variable hours or part-time employees that most people struggle to get it right. Embarrassingly enough, the actual ministry that looks after workers, they themselves got caught out.”

When to buy the bundle

Why use standalone payroll when you can combine it with HR software? Paying staff and managing their information is easier if it’s in the one application. HRIS (HR information systems) suites remove manual data entry of employee records with the goal of saving time and reducing errors and stress. Some suites just focus on HR documents and payroll, while others include rostering and scheduling, online learning, employee benefits programs – and even managed payroll services.

Employment Hero is a case study in the development of the industry. Originally HR software, the company bought KeyPay in 2022 to provide an integrated solution. (Employment Hero still integrates with competing, standalone payroll software.)

In April, the company announced it had acquired HR consultancy Employment Innovations. This consolidation gave Employment Hero a launchpad for its managed payroll service, which services more than 750 companies to date in Australia, New Zealand, the UK, Singapore and Malaysia.

The acquisition of the professional services firm will also help the company build a fully automated payroll service, says CEO Ben Thompson. Employment Innovations’ payroll experts will help train Employment Hero’s systems to automate complex payroll processes that can change on a daily basis.

“We believe developing automated payroll will be revolutionary. It will make payroll more efficient and accurate for thousands of businesses across the globe. Simple pay runs can be completed instantly and more complex ones can be run in an hour or two. We predict this could reduce the time spent on manual payroll processing by up to 80%,” Thompson said in a release marking the acquisition.

Even Xero looked at muscling into the HRIS space through its €184 million acquisition of Planday, a rostering and scheduling application, in 2021. Xero hoped that Australian and New Zealand companies would buy Planday to record their hours worked and feed the data directly into Xero’s payroll module.

However, Xero announced that Planday would cease operating in Australia and New Zealand by 30 September 2024. Xero CEO Sukhinder Singh Cassidy said the decision to pivot to Deputy in Australia reflected Xero’s recently released FY2025–2027 strategy and would mean focusing Planday’s efforts on European markets.

Instead, Xero has bought a US$25 million minority stake in competitor Deputy. Xero said the partnership with Deputy, which is a shift work rostering software, would involve “deeply embedding Deputy’s capability into Xero payroll for Australian customers, making payroll and workforce management even easier”.

Employment Hero is not the only HRIS player on the payroll block. Elmo is another well-known Australasian brand. It began life as a learning management system for training employees and evolved into an end-to-end HR technology platform. It now boasts modules including time and attendance, recruitment and performance management, as well as online learning.

The payroll module has local support and is integrated with its HR modules. Onboarding and leave transactions flow directly into payroll for processing.

Elmo calculates its user-based pricing on the number of modules, support and implementation services, which you can only find out about through inquiring. Employment Hero’s payroll starts at A$6 per employee per month, an A$8 plan adds an awards calculation engine, rostering and time and attendance, while managed payroll is A$27.

US competitors have also entered the fray. Silicon Valley darling Rippling is now selling Australian payroll as part of a modular HRIS that focuses on workflow automation. Rippling can trigger workflows based on any data in Rippling’s ‘employee graph’. The global payroll module can pay employees in multiple countries and currencies, and accounting or ERP software.

The flexibility of Rippling’s payroll engine is a major drawcard. John Rigoni CA, finance lead at software company Mentorloop, switched one client with 150 staff to Rippling because he wanted to pay staff twice-monthly, rather than the typical fortnightly cycle, which he said wasn’t possible with Employment Hero. Paying on the 15th and 30th of every month rather than every 14 days reduces the number of pay runs from 26 to 24 times a year.

The client in question had salaried office staff, workers on the factory floor who could clock up overtime, part-timers and casuals. When paying fortnightly, in the longest months the company had to also calculate the payroll expense for the remaining five days.

“That’s easy for salaried staff but much harder when you have got casuals who may have done overtime. And if you pay twice a month, at the end of every month your HR cost is correct and you can just apply it to the P&L,” Rigoni says.

Another feature Rigoni likes is that when you run a payroll in Rippling, it automatically compares it to the previous months and shows variances. “If you have done something wrong it will highlight that,” Rigoni says.

Like other systems, Rippling transfers funds from the company bank account to employees’ accounts. Rigoni is still needing to be a little autodidactic, teaching himself how to use the platform, a process which is taking time – and shows the one downside of the suite approach.

“Rippling is pretty good because you can customise a lot of things, but with that comes more complexity about understanding how to do things in it.”

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Real-time wages – a fad or the future?

For anyone who has had to struggle through a complex payroll, the idea of paying employees once a day rather than once a fortnight is completely bonkers. And yet there is already a category for companies that provide ‘real-time’ pay (it’s daily, not hourly) as a better alternative to using credit cards or payday lending.

Software company Paytime is an earned wage access provider that gives Australian workers access to their money on the day they earn it.

Businesses integrate their payroll software into Paytime’s platform, so employees can access wages any time during the month. Many of the big names are already supported, including Employment Hero, ADP (automatic data processing), AstutePayroll and Elmo.

Once connected, a company can offer on-demand pay, without changing its payroll process.

When an employee takes money out of their earned pay, Paytime sends the money to the employee using Paytime’s own funds, so there’s no impact on cashflow. Paytime charges a withdrawal fee “similar to that charged by an ATM”. (Some companies subsidise or cover this fee.) Paytime then automatically logs the withdrawal and fees in the payroll software.

When payday comes, the company runs its payroll as usual and employees receive their wages with any on-demand withdrawals and fees shown as deductions.

Paytime claims that real-time wages improve employee engagement and retention by reducing financial stress.

Employment Hero Payroll also offers earned wage access through a feature called InstaPay.

Both solutions offer up to 50% of earned wages but Employment Hero caps withdrawals at A$1000 a week, while Paytime has no cap and can even increase the percentage if the employer agrees.

The pricing also differs. Paytime charges a fixed fee that doesn’t vary by timing or by the size of the withdrawal. Employment Hero charges 1.3–1.5% per transaction.

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