Payroll reconciliation is the process of cross-checking and verifying all payroll-related data to ensure that employees are paid accurately, employer obligations are met, and compliance is maintained. This involves comparing the calculated payroll figures against accounting records, timesheets, leave balances, tax withholdings, and superannuation contributions.
In Australia, payroll reconciliation is essential for ensuring adherence to Fair Work obligations, ATO reporting (such as PAYG withholding and Single Touch Payroll), and correct superannuation payments. It is typically performed at the end of each pay cycle and during end-of-financial-year (EOFY) processing.
Failing to reconcile payroll properly can lead to:
Whether you run a small business or manage a large workforce, payroll reconciliation is crucial to maintaining financial integrity and legal compliance.
To perform payroll reconciliation effectively, businesses must check and verify the following elements:
Compare recorded work hours, including overtime and breaks, with digital or manual timesheets to ensure they match. This helps validate gross pay calculations.
Ensure that leave taken (e.g. annual leave, personal leave, long service leave) has been accurately deducted from employee leave balances.
Cross-check gross wages, bonuses, commissions, and deductions (such as salary sacrifice or garnishments) to confirm the net pay matches the payslip.
Ensure PAYG withholding amounts are correctly calculated and match the ATO tax tables. Incorrect PAYG figures can cause problems at EOFY or with STP Phase 2 reporting.
Verify that super is calculated at the correct rate (currently 11.5% as of FY24–25) and matches what was submitted via your super clearing house.
Confirm that the total amounts paid via your bank match the payroll register and that employees received correct payments.
Check that payroll journal entries correctly reflect wages, liabilities, and taxes in your general ledger or accounting software (e.g., Xero, MYOB, QuickBooks).
Manual reconciliation using spreadsheets is prone to error and can be time-consuming. Modern payroll management software, like Microkeeper, automates many parts of this process:
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Under Fair Work rules, you must keep payroll records for at least 7 years.
Yes. Regular reconciliation can uncover suspicious payments, ghost employees, or time theft.
You should correct it as soon as possible. For ATO-related issues, updated STP submissions can be lodged. Consult your accountant if unsure.
Payroll reconciliation is more than a routine task, it’s a vital process for financial accuracy, employee trust, and legal compliance. By adopting modern payroll tools and maintaining good reconciliation habits, Australian employers can protect their business from costly errors and focus on growth.
With Microkeeper’s end-to-end workforce platform, reconciliation becomes a seamless part of your pay run. Automate, verify, and stay compliant—all in one place.
Disclaimer: This glossary article is for informational purposes only. Please consult with a qualified accountant or payroll expert for specific advice regarding payroll reconciliation in your business.