What is a Payroll System?
What is a Payroll?
Comprising a list of a company’s employees, the term payroll primarily refers to three key areas in the process that companies use to pay their employees. They are:
- The sum of all employee salaries.
- All information on its employees’ salaries, bonuses and withheld taxes.
- The department within a company in charge of calculating and paying employees.
A payroll also helps companies keep track of a variety other financial elements, including:
- The correct amount of funds are paid to respective government agencies.
- Withholding taxes from paychecks where applicable.
This facilitates timely payment of taxes and other fees to government agencies. A failure to do so can result in hefty fines and/or jail time – as well as possibly risking irreversible damage to a company’s reputation.
Small and middle-sized enterprises (SMEs) stand to benefit a lot from using an effective payroll system and avoiding these problems, which come at a time when these companies are most vulnerable.
What is a Payroll System?
A payroll system refers to a computerized software designed to manage all tasks related to employee payment and taxes. These payroll systems are highly automated, requiring minimal input from users in order to perform complex and tedious tasks automatically and in a fraction of the time it would take to do it manually and with far greater accuracy. (e.g. AutoCount)
In addition to its speed and accuracy, payroll system software also automatically updates itself whenever new tax laws are introduced, and will modify its calculations based on those changes – a task that, when left to manual methods, will often result in errors or completely omitted entirely!
- Calculating employee payments/salaries.
- Printing and delivering payment checks.
- Paying government employment taxes.
What are the advantages of a Payroll System?
To the HR department and a company as a whole, ensuring that employees are paid on time and correctly is crucial as a late and untimely payment can affect employee morale negatively, who are sensitive to such discrepancies.
A payroll lets a company’s HR do this effectively and accurately, factoring in tax withholdings and other deductions from each paycheck. Effective use of a payroll system should virtually prevent most errors in payroll processing from occurring in tasks related to calculating employee work hours, total salaries and tax withholding – a potent force-multiplier for any business.
It will also allow companies to free up available manpower, as it would be unnecessary to hire an accountant to process the payrolls, lowering a company’s working capital. In addition, computerized payroll systems give business operators greater control over the entire process, including the ability to generate business reports at anytime and anywhere as long as they are connected to the system.
Important Criterion of a Good Payroll System
Choosing a good payroll system to implement from the start is an important step to prevent unnecessary problems from arising in future. This includes ensuring that the chosen software is protected by an effective security, including encrypted passwords and protection from hacking and other unauthorized access and manipulation of stored information.
The second important factor to consider is the system’s reliability and credibility. Does the system keep up to date with tax law changes? Does it include all the necessary parameters in its calculations to ensure its accuracy and dependability? How accessible and/or viewable is the data stored in it? The system should also be stable and should not be prone to failure.
Remember that once a payroll system has been chosen and integrated into a business any decision to migrate the information in it to another system is a very difficult task. Not only is the migration process slow and tedious, but it could potentially lead to data loss or corruption.