The accounting for payroll involves all aspects of paying compensation and benefits to employees. The outcome of this process is precise records regarding the expenses associated with all types of compensation, as well as timely payments to employees.
Though some systems that incorporate more or less automatic payroll systems may not include all of these steps, the general process flow will apply to most payroll systems:
Set up new employees. Have new employees fill out payroll-specific information as part of the hiring process, such as the W-4 form and medical insurance forms that may require payroll deductions. Set aside copies of this information in order to include it in the next payroll.
Collect timecard information. Salaried employees require no change in wages paid for each payroll, but you must collect and summarize information about the hours worked by non-exempt employees. This may involve having employees scan a badge through a computerized time clock.
Verify timecard information. Summarize the payroll information just collected and have supervisors verify that employees have correctly recorded their time.
Summarize wages due. Multiply the number of hours worked by the pay rate for each employee, also factoring in any overtime or shift differentials.
Enter employee changes. Employees may ask to have changes made to their paychecks, usually to the number of tax exemptions or pension withholdings. You may need to record much of this prior to calculating taxes, since it impacts the amount of wages to which taxes are applied.
Calculate taxes. Use tax tables to determine the amount of taxes to be withheld from employee gross pay.
Calculate wage deductions. There may be a number of additional deductions to take away from employee net income, including deductions for medical insurance, life insurance, garnishments, and union dues. You must also track the goal amounts for these deductions, so that you stop deducting once the goal totals are reached.
Deduct manual payments. If manual payments have already been made to employees, such as advances, then deduct these amounts from the remaining net pay.
Create a payroll register. Summarize the wage and deduction information for each employee in a payroll register, which you can then summarize to also create a journal entry to record the payroll. This document is automatically created by all payroll software packages.
Print paychecks. Print employee paychecks using the information in the payroll register. You normally itemize gross wages, deductions, and net pay in a remittance advice that accompanies the paycheck.
Pay by direct deposit. Notify your direct deposit processor of the amount of any direct deposit payments, and issue remittance advices to employees for these payments.
Issue paychecks. Have a paymaster issue paychecks to employees, requiring employee identification if there are a large number of employees.
Deposit withheld taxes. Deposit all withheld payroll taxes and employer matched taxes at a bank that is authorized to handle these transactions.
Payroll administration is one of the most important business processes your company performs, yet one of the most cumbersome and time-consuming daily activities. It doesn’t generate direct revenues, so keeping this process to a bare minimum in time and cost means savings and more efficiency to your business. This is why you need payroll software, so you can focus on income-generating strategies and daily core tasks.
Payroll management software can be classified by: deployment (cloud vs. enterprise), business size (small business vs. enterprise) and target market (general vs. industry-specific). There is another way to distinctly classify payroll software, one that may impact on your workflows.
Integrated payroll management system. Payroll, accounting and HRM have overlapping processes.; thus, often, payroll management is integrated as a module in accounting software, HRM or an organization-wide business system like ERP. It can be a standard feature or separately charged as an add-on. Integrated payroll management covers the core tasks like payroll processing, income tax calculations and paycheck printing.
Dedicated payroll management. These are standalone apps that go beyond core features of payroll and tax software with specialized functions as time-tracking & attendance, customized reporting, benefits management and even a tax planner. A good dedicated payroll application should easily integrate with other HRM and accounting systems. This type of payroll system is popular among payroll services and small businesses.
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What are the must have features for a payroll software?
The essential part of any organisation is payroll. Every worker’s salary compensation is based on the payroll system. Now the features of payroll software are used to streamline and handle the payments of the employees. From automating several tasks such as depositing the salaries, to taking care of taxes, a payroll management software is highly helpful.
- Integrated Accounting. The human resources team and the accounting department can save time for managing every payroll detail manually. Thus, payroll programs can eliminate the scope of miscalculation and placement of the critical data in a wrong file.
- Recording Files and Payslips. The software can generate reports including leave summary, salary benefits, and salary statements. By using the digital platform, the software can print payslip. Moreover, you can even download and print the regulatory payroll. Acting as the sole repository of employment record and document, this software can be handy for any business. This software includes essential features like experience letter, organisational chart, employees profile, occupational safety and tax, and offer letter.
- Reporting in Payroll Processing Software. Through the software, you can customise the report criteria and follow the reporting tasks taken care of:
- Timesheet reports
- Balancing audit reports
- Wage and liability audit-related reports
- Unemployment wage reports
- Keeping Track of Earning. One of the best payroll software features is that it manages the earnings of the employees.
- Tax Management Done Easily. The features of the payroll software solutions execute the task of tax filing and computing. With the features the employee taxes are filed within the deadline. This way, the chances of facing penalties are avoided. The payroll program software stores pay calculating records every hour. It also pays attention to tax benefit purposes.
- Depositing Directly to Account. One of the best features of payroll soft is that the payroll is deposited to the bank account directly. The software saves huge expense on the annual supplies and processing. It can also take care of any fraudulent activities related to the employee’s salary. The funds are transferred within no time directly from the company account to the employee account.
- Customisation at its best. Among all the key features personalisation plays an integral role. Through customising every check and form, the whole system of payroll software is managed. You can customise the tables and menus here. You can also customise the reports, screens, and fields to offer the best kind of service. The software can print logos of the organisation for attaching them to the reports and checks.
- High Level of Security. The primary security feature required in the software is that the database encryption. For restricting the highly valued resources like the tax files, employee personal details, and payroll information, the software has password protection. With the comprehensive audit trails, the security feature also focuses on the control access. This takes care of sensitive information to the highest degree. The addition of record level security can save the company form fraud cases at an optimal level.
- Know about Streamlining. The worker can get access to the records or printed pay stubs through the automatic generation of the payroll system. There is an option for getting in touch with the third-party administrator and track in-house bookkeeping.
- Zero Error, High Level of Accuracy. The best thing about payroll automation software is that every work is carried out by following a high level of skill. By installing the latest updates on the application, the features of payroll software remain upgraded. And the system does not have to pay the price of manual error. With the help of soft, there is less chance of human error. Also, the tax forms are pre-filled following the worker’s payroll details. The unbiased third-party app can keep the records up-to-date every hour even if you outsource the operations.