How to Manage Payroll Processing In an Organizationadmin
‘Payroll’ constitutes complete records of all financial entities like salaries, wages, bonuses, tax components, and retirement benefits. Payroll has two stages, Payroll Accounting and Payroll Administration. Accounting involves computing all the salary components and Administration is managing the process. There are monthly payroll cycles which dispense the monthly salaries and payouts. The yearly payroll cycle deals with annual increments and bonuses.
Large scale companies choose to maintain their payroll department as they can afford to hire highly skilled professionals. They adopt advanced computerized, payroll accounting software. This accounting software supports large amounts of data. They are automated systems that calculate amounts payable and imbibe the taxation policies already fed into it. Monthly salary slips are generated at a relatively faster rate. The most significant advantage lies in the error-free results and smooth functioning of the system. The primary challenge is to keep the employee data correct and up-to-date.
Accounting software is usually built into separate modules, each with its specific function. There are taxation modules which assist in computing tax factors for each employee. Leave modules records all the leaves taken and keeps a register of the same — employees’ modules which maintain employee date of joining, names and daily attendance. Complex modules exist which keeps track of incentives, bonuses, LTA, commissions and overtime. Each of these modules is updated separately and then integrated, where they can exchange data and present superior performance.
They can provide an intranet portal facility to the employee where they can view their necessary details and modify them if allowed. Timesheets can be entered directly by the employee and processed by the management at the end of every month. Salary slips can be viewed, downloaded and printed if necessary. They can apply for leaves through the web and seek approval of the same from their supervisors. Intranet facility provides options for investment declarations and views their tax forms. An employee can post their payroll related queries on the portal and get responses quickly.
Certain medium and small scale companies hire the services of a third party payroll to reduce their effort on support functions. These firms have an experienced team of people who manage the complete payroll cycle with accuracy and speed. They usually provide end-to-end solutions with zero problems. They are legally liable to provide the best of their services.
There are several advantages to hiring a third party agency:
- They are capable of maintaining high levels of accuracy with the help of their specialized tools and applications.
- Cost-effective to the company as it need not maintain a set of highly trained personnel. This will, in turn, require payroll accounting software which is normally quite expensive.
- All salary slips intended to the employee must be generated and dispatched (electronically or through the post) on time, without any problems.
- These agencies hire highly trained professionals who are well aware of payroll cycles, salary components, deductions, taxation, insurance claims and retirement benefits.
- These agencies are liable to compensate for any errors and mismanagement of records. They are also responsible for keeping employee information confidential and up-to-date.
- This enables the company to concentrate on its core area of business entirely.
There are small scale companies which continue to use the manual method or paper-based salary computation. This is feasible only if there are few employees in that company. The employee takes all public holidays, loans and leaves must be diligently recorded. Manual methods are usually prone to human error; tend to be risky and tedious.
Accountants are also hired to assist in payroll activities. They are chartered accountants who are specialized in payroll management. They usually are well informed in the tax laws and insurance clauses for that region. They are aware of components such a provident fund, gratuity, and final settlements. Hiring accountants is again a manual method of salary computation.
Companies can adopt any of the methods to manage payroll processing. It depends on the size of the company and its specific field of business. One can never slacken on payroll management and must implement industry-proven best practices to attain efficiency and most importantly, ensure employee satisfaction.