- June 22, 2023
- Posted by: 10bits_mexican
- Category: Payroll Services
Different companies make use of different techniques for managing their payroll. Some companies opt for the best payroll services for small business, while others carry out the entire process manually. A lot of companies also make use of payroll software for payroll management.
Well, to identify the right payroll method for your organisation, you need to have a proper understanding of how the payroll processing method works. So, here we will talk to you about the different steps to process payroll.
Why is Payroll Processing Important?
Payroll is undoubtedly the most important business function. Employees take up jobs so that they can earn money and make a living. Earning money acts as a primary source of motivation for them. So, it is quite easy to understand what would happen if a company fails to deliver the payroll on time.
Proper payroll management has got a big role to play in boosting the morale and productivity of the employee. An accurate payroll can create a sense of trust between the company and the employees. The employees will become more motivated when they acquire the desired financial stability. This can ultimately impact their performance.
Proper payroll processing will also help the companies to remain compliant with the tax laws. However, payroll processing can be a complex task, which is why so many companies prefer to go for payroll services in USA.
Why does payroll take so long?
Payroll processing involves a lot of complex steps. Each of these steps may take a lot of time to complete, which is why payroll processing takes quite a lot of time. A considerable amount of time is also passed between issuing the payment and the moment the money gets deposited in the employee’s bank account.
You often hear a lot of people complaining about payroll getting delayed. This mostly happens because of direct deposit. Direct deposit is the most common way of paying employees and takes around three days to complete. However, there are various alternative methods as well in which the payment can be processed faster.
Nowadays, many companies are also using different advanced payroll management systems for speeding up the process. The companies can also outsource the payroll management job to ensure that the entire task gets done professionally within a short period.
What are the stages in payroll processing?
NThere are three different stages of payroll processing. Each of these stages has various sub-stages. So, let us have a look at what these stages are:
The pre-payroll activities involve three different tasks:
Defining the payroll policy: This is the first stage of payroll processing. Here you will have to define the policy that you will be using to process the payroll. These policies will become a standard once the management has approved them. The policies include leave and benefit guidelines, attendance rules, wage guidelines, etc.
Collecting the required data: The next step is to collect the data for the payroll process. You will have to collect data from different departments. The data includes pay scale, benefit eligibility, income tax declaration, health insurance declaration, and much more. You can also take the help of payroll solutions for data collection.
Verifying the accuracy of the data: Next, you will have to verify the accuracy of the data. A single mistake on your part can cause the entire payroll process to become faulty. So, it is really important to perform a proper analysis of the data to ensure that everything is in order. You will also have to include all the active employees of your organisation in the list to ensure that the payroll can be processed accurately.
Stage 2: Actual Payroll Process
The next step is the actual payroll process. Here, two different tasks are carried out.
Calculating the payroll: The payroll management system should contain all the data collected in the previous stages. There should be a distinct set of data for each employee. The payroll will then be calculated based on the acquired data.
Statutory compliance: During the payroll calculation process, it is important to ensure that the statutory deductions are done by the laws and regulations of the country. The most important rules that businesses follow to ensure that the payroll is processed correctly are:
- Provident Fund
- Tax Deducted at Source
- Employees’ State Insurance Fund
- Professional Tax
Stage 3: Post-Payroll Process
Next comes the post-payroll process. Here again, three different tasks are carried out:
Reconciliation: Once the payroll is calculated, it is time for you to verify the results by comparing the present information with that of the previous months. The data is reviewed to ensure that all the information is up-to-date. During the reconciliation phase, various details are taken into account including the new hires, salary adjustments made, total working hours, etc.
Payout: After the reconciliation phase comes the payout phase where the payroll is released. Different companies use different payment methods for making their payments to employees. The payment options that are frequently used by businesses include bank transfers, cash and cheque.
The salary is often deposited directly into the employee’s bank account using a bank transfer. For that, you will have to provide your bank with a funding file containing the bank account number, total salary and other details of the employees.
Accounting: Accounting is a crucial part of the post payroll process. You need to account for the payment made to the employees. The salary, tax deductions, and other expenses will have to be recorded as the company’s expenditure. This is mostly done through various payroll applications. Without proper accounting, you can lose track of your business expenses.
Reporting: If you want all your business operations to be carried out smoothly and effectively, then you need to track the payroll process and analyse it carefully to identify various underlying factors. You should acquire the necessary data from the payroll to produce reports regularly. This is going to help you out in acquiring a clear insight into the financial state of your organisation.
When it comes to payroll management, maintaining proper compliance is extremely important. So, the entire payroll process needs to be carried out in a highly professional way. We, at 10bits, have the required experience and expertise of handling such challenging situations. We have been offering payroll services for small businesses for quite a while now. We will also make use of highly advanced forms of technology in offering you the required services. So, if you do not want to deal with any kind of compliance issues and want your payroll to be processed accurately, then you may contact us and avail our services.