What is Payroll – Definition, Processes & Solutions
Oct 07, · Processing payroll means compensating employees for their work. It involves calculating total wage earnings, withholding deductions, filing payroll taxes and delivering payment. These steps can be accomplished manually, but an automated process is usually more accurate and efficient and may help you comply with various payroll regulations. Apr 20, · Payroll processing refers to the task of managing the payment of wages by a company to its employees. The steps involved in payroll processing typically include gathering employee time information for a selected time period, managing benefits & .
Payroll processing is one of the most crucial yet complicated business processes. Every business strives to carry out the operation in the most efficient way. But, mistakes occur and might cause serious consequences. Since SMEs have a lesser employee count as compared to large enterprises, they proceseing to process payroll using spreadsheets or outsource it to a professional. These methods of payroll processing are highly susceptible to errors. While it is important to ensure accurate and timely calculations, adhering to statutory compliances is also critical.
To ensure that businesses are compliant pgocessing their employees are satisfied with the payroll process, pahroll need to have a better understanding of the entire process and why payroll automation is the need of an hour.
It starts with preparing a pauroll of employees to be paid and ends with recording those expenses. But, businesses can manage all the complexities effortlessly by choosing modern technology. Ehat payroll cycle is the time gap between two salary disbursements. Businesses can opt to pay salaries on a weekly, bi-weekly, or monthly basis. Generally, it is processed every month in India. As a business owner, you should understand the complexities involved id payroll because it is one of your highest expenses every month and quite a time-consuming task.
The teams need to monitor the entire process carefully. Here are the payrol of steps involved in executing payroll successfully from ground zero. As the first step of payroll processing, businesses should onboard employees and prepare a list of employees to be paid. In this step, b usinesses should define their policies and get them approved by peocessing management to ensure processinv payroll execution.
These policies include pay policy, leave and attendance policy, employee benefits policy, payfoll. Employee inputs like PAN, address, bank account details, etc. Usually, these inputs are collected from employees at the time of joining by the concerned teams. Once the inputs are received, check for validity of the details with respect to company policy, approval model, etc.
Also, ensure that all active employees are taken into consideration, and no former employees are included for salary and compliance payments. In this stage, the validated inputs are fed into the system for processing payroll. This results in net payment calculations after adjusting necessary deductions and taxes due. These calculations are done using spreadsheets.
So, it becomes difficult to reconcile and verify the values to avoid any errors. However, automated payroll software could have eliminated the risk of clerical or mathematical errors. Then, businesses need to ensure that their bank hwat has sufficient funds to make salary transfers. Then, a salary bank advice statement is sent to the concerned bank directing the bank to disburse salaries.
All these time-consuming tasks can be avoided with one-click salary disbursement feature of automated payroll software. Then, these payments meanf made to the appropriate government departments with the due dates. This step involves payslip distribution employees, along with their tax computation sheets. Employees can log-in to their account and access their payslips bt. Businesses in India have to follow a legal framework while disbursing salaries to their employees. This framework is made up of four components.
The process of being compliant is complex and expensive if not done the right way. Compliance is complicated because each of these is computed differently than the other.
The calculations are derived from the payroll data of each employee. Furthermore, the businesses must periodically file returns on four different portals to submit such computations to the government. Most businesses use spreadsheets and other manual methods to work on compliance, which is not the most efficient way to be compliant. The computations are lengthy, time-consuming and ny. This new amendment introduced lower income tax processijg with certains exemptions and deductions. Businesses had to struggle while incorporating these processinv in spreadsheets and decoding the new law.
Moreover, explaining the implications of such changes to their employees became a tough challenge. Another example is the changes announced in Atmanirbhar Bharat Abhiyaan. The statutory compliance requires businesses to follow all regulations, and failure to do so results in unprecedented legal trouble procesding unavoidable penalties. For processing payroll, employees are required to provide a substantial amount of sensitive data in the form of official documents to the concerned team.
Employees regularly approach the payroll team how to get the regis in diamond have their particulars updated. Rental agreements, bank account details and other relevant documentation are routinely brought up to date by the team to ensure that the process runs smoothly. If you, as a business owner, are managing your payroll manually, then Your Payroll Process Might be Flawed!
Many businesses at their initial stage of payoll find spreadsheet-based payroll how to set up shared google calendar on iphone convenient because they only have a handful of how to make awesome hamburgers to manage.
This method involves calculations using standard templates, that have set mathematical formulas for the salary whaf compliance payment computations. Also, the opportunity cost of using a traditional system over automated methods is very high.
Payroll outsourcing means entrusting your payroll execution to an agency. Based on their payroll cycle, they provide the agency with salary information and other data such as attendance, leaves, reimbursement details, etc. The agency then calculates dues and is also responsible for complying procewsing statutory compliances. Automated payroll software will do away with all the challenges of using spreadsheets or outsourcing it.
There are many payroll automation tools and software available in the market which can reduce manual efforts and increase efficiency. Apart from carrying out payroll computations, the software needs to be updated with the latest compliance laws. There are many automated payroll software available to choose from. Here are the features that you should consider while choosing a software.
RazorpayX Payroll is built to focus on delivering a one-click, seamless, and end-to-end payroll processing experience to businesses. Combining what phone code is 0151 functionality of payroll software with that of outsourcing services, RazorpayX Payroll not only does calculations but also executes the whole process.
Payroll execution is what sets RazorpayX Payroll apart from other solutions. Whar agencies and most HRMS simply compute salary dues along with statutory liabilities.
However, they do not execute payroll. Most service providers hand over the salary figures to the finance department, which then uploads them onto pahroll bank portal for disbursal. RazorpayX Payroll eliminates the involvement of the HR team, what is meant by payroll processing finance team and Chartered Accountants, who payrol otherwise be handling calculations, processing, disbursal, and compliance.
Compliance is a major pain point in this entire process, demanding the involvement of CAs and other personnel with compliance expertise. Given the complexity of labour laws, ensuring that the payroll process is compliant with the prevailing laws has become increasingly difficult. RazorpayX Payroll also facilitates employee self-service and processes dues based on the tax regime chosen by the ment. Further, it enhances transparency by ensuring that payslips and other relevant information are instantly accessible to the employees, being just a login away.
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Steps for processing payroll
Dec 30, · Payroll is defined as the process of paying salary to a company’s employees. It starts with preparing a list of employees to be paid and ends with recording those expenses. It’s a tangled process that needs different teams such as payroll, HR and finance to work together. Jun 30, · Payroll is the business process of paying employees. Running payroll consists of calculating employee earnings and factoring out federal and state payroll taxes. The term payroll can also refer to: A business’s financial records of employees/5(24). 10 rows · You can define and establish earnings, deductions, taxes, and processes that fit the .
Processing payroll means compensating employees for their work. It involves calculating total wage earnings, withholding deductions, filing payroll taxes and delivering payment. These steps can be accomplished manually, but an automated process is usually more accurate and efficient and may help you comply with various payroll regulations.
You must also ensure your calculations are correct and remember to file all the necessary taxes and paperwork with government authorities on time. As you add more employees, the more challenging payroll becomes and any mistakes you make can result in costly tax penalties.
And if business slows down, you may be faced with the difficult decision of delaying payments or diverting money from other resources. With direct deposit, you only need to cover the cost of payroll on certain days of the month, allowing you to better manage your finances. Plus, going digital cuts the expense of printing paper. Some of the laws you must comply with include:. This means that you need an accurate means of tracking time and attendance so you can apply overtime wages in accordance with the law.
The FSLA also requires you to keep certain records for each nonexempt worker. Payroll records, for example, typically include hours worked each day, total hours worked during the workweek, the basis on which employee wages were paid, regular hourly pay rate, total overtime for the workweek, date of payment and the period covered, and total wages paid each period. These records must be kept for at least three years and the records on which payroll calculations are based, such as time cards, need to be kept for two years.
Each pay period, you must deduct 6. Most employers contribute to the federal and a state unemployment programs that compensate workers who have lose their jobs. As such, FUTA is not a payroll deduction because it only applies to employers, not employees.
Exemptions may apply, however, if you have household or agricultural workers. In addition to federal regulations, you must abide by state payroll processing laws. Each state has its own rules, some stricter than others, governing minimum wage, payday schedules and recordkeeping.
A good way to stay compliant is to task an executive or someone from your legal department to compile a list of all the labor laws that apply to your organization.
Ask that he or she track changes to existing laws and document any new laws being proposed. Review these findings on at least a monthly basis so you can adequately adapt your operations and avoid penalties. View state payday requirements View state minimum wage laws View all state labor laws. An employer identification number, also known as federal identification number, is a nine-digit number format: the Internal Revenue Service IRS uses to track your organization for tax purposes.
Think of it as a Social Security number for your business. Some state and local governments may also require you to have a separate tax identification number. Before you begin processing payroll, you generally need to gather these documents, some of which may be required by government agencies:.
In order to comply with federal payroll tax laws, you need to properly classify you workers as either employees or independent contractors. The general steps to do this are:.
Misclassifying a workers can result in penalties and you may be responsible for any unpaid wages, including overtime.
The most common payroll cycle or pay period in the United States is biweekly. See how it compares to other payroll frequencies:. Payroll schedules are a matter of preference, but minimum standards may apply. Some states require at least semimonthly payments for all employees, while others have specific frequencies for different types of workers.
If you are not bound by state payday requirements, you can choose whichever pay period works best for you and your workers. Employees, especially those in low-wage jobs, usually prefer to be paid more often, but as your pay frequency goes up, so does your payroll processing costs.
A typical payroll policy covers:. Clearly defined workweeks are necessary to comply with FSLA overtime rules, as well as state wage payment requirements. You can choose when your workweek starts and ends, but they typically must constitute seven consecutive hour periods. Accurate payroll begins with precise timekeeping.
Your employees should know how to log their hours — time clock, paper timesheets, etc. The federal government does not require lunch or meal breaks, but most states do. When offering rest periods, clearly define their length and let employees know if the break is paid or unpaid and if they need to clock their time. Explain who is eligible for overtime pay and how the rate is applied. Nonexempt employees covered by the FSLA must be paid no less than minimum wage for all hours worked and at least one-and-a-half times their regular pay rate for each hour worked over 40 in a workweek.
If your state also has overtime regulations, you must follow the law that provides the most generous benefit to the employee. Document how often you will pay your employees. Weekly, biweekly and semimonthly are the most common. Also note which specific day of the week will serve as payday. Include information on the forms they need to complete to get their withholding amounts correct and how wage garnishments work. If you offer your employees health insurance or retirement plans, explain the costs and how they can participate.
Also provide information on paying for benefits on a pre or post-tax basis. In addition, pay careful attention to state laws covering the payment of final wages to those who leave your organization. The FSLA and state authorities require payroll records to be kept on file for certain periods of time. Document the recordkeeping laws that apply to you and how you will maintain confidentiality.
Every business needs someone to administer payroll. You can hire an employee specifically for this purpose, but in most cases, the role is filled by an office manager, human resources director or even the owner. As a result, many payroll administrators have responsibilities beyond simply running payroll. Those who excel as a payroll manager have a specific skill set.
They tend to be detail-oriented, organized, analytical and technically inclined. Their success, however, requires the collective teamwork of employees, managers and the human resources department. For example, workers must submit accurate information and managers need to promptly approve timecards in order for payroll to be processed correctly and timely.
Keep in mind, however, that doing it manually opens the door to human error. The amount you withhold is determined by the Forms W-4 submitted by your employees and current tax rates. Employees can choose to have you withhold money from their paychecks to fund retirement plans and insurance premiums. Each of these requires a separate consent form.
Sometimes, you must also withhold deductions for court-ordered garnishments, such as child support and alimony. Most states require you to provide a pay statement in either print or electronic format at the time wages are paid. Some laws allow employees to opt in or out of electronic statements and you may have to ensure they are able to easily view or print their pay information. The goal of these regulations is transparency. The hourly rate, total hours worked, gross pay, net pay and deductions are usually required details.
Avoid violations by contacting state labor departments for specific pay statement guidelines. You can purchase check stock from the bank that has your payroll account or a stationary supply store. When placing your order, make sure that the check stock is designed to prevent fraud, uses ink that can be interpreted by bank check readers and has all of the necessary information. Once the checks are printed, seal them in a double-window envelope so that the destination and return addresses are visible, apply the appropriate postage and put them in the mail.
This process can be simplified by using a payroll service, which in some cases, includes paycheck delivery. Printed paychecks were the tried and true method of compensation for many years, but thanks to technology, there are more efficient and less expensive ways to pay your employees. Two such methods in use today are direct deposit and pay cards. Direct deposit electronically transfers money from your payroll bank account to the personal bank account of an employee.
For these reasons, direct deposit has surpassed printed checks as the preferred method of payment. However, employees must have a valid bank account and it can sometimes take up to two weeks to set up. Whichever wage payment methods you choose to offer to your employees, be sure to review all state-specific requirements. Most allow electronic payment, but it generally cannot be the only option. Long hours spent on administrative work and responding to letters from the IRS or court orders for wage garnishments are tell-tale signs that your payroll process could use some improvements.
Here are some tips to streamline your operations:. The method you choose to process payroll will determine how long it takes. Manual calculations can take hours to days, depending on how many employees you have and the laws that you must comply with.
A more efficient approach is to use payroll software, which can run payroll in minutes thanks to automation. The amount of time in between each pay day is known as a payroll cycle. It can be as short as a week or as long as a month. During this period, several repeatable steps take place:. End-to-end payroll processing integrates payroll with other aspects of workforce management, such as performance measurement, training, scheduling, benefits and compensation.
By making this connection, you can improve communication, recordkeeping, analytics and efficiency throughout the employee life cycle.
Payroll processing is important because paying employees late or filing taxes incorrectly may result in penalties and interest on back taxes. A payroll process must be in place before you hire your first employee. You generally will need to:. When it comes to processing payroll, you have several options to choose from, depending on the size of your business and individual needs.
The most common are:. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.