No matter what the size of the company is, every company has one thing in common: to process their employees’ payroll. Every company’s HR manager has this key responsibility to process their employees’ payrolls on time. It is a critical task without which the company’s reputation and trust can be disrupted. Even one mistake can put employees’ trust and the organisation’s reputation at risk.
Payroll management, therefore, is a significant and effective way that should be done with utmost importance.
So, this article will brief you about the 8 ways to process the payrolls for your company. It will also explain how HR and the company provide mutual help to automate payroll processing.
So, let’s get started with the steps of the payroll process, but before that, let’s understand what Payroll processing is.
What is Payroll processing?
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.
Payroll processing can be complex to manage because of its varying factors, such as pay scales, employee classifications, promotions and terminations. It’s essential to have checkpoints in place at the critical points of payroll processing for as much error prevention as possible.
Whichever the case, it’s crucial that you understand the steps involved in a payroll process so you can pay employees accurately and on time. Processing payroll adequately also helps your business operations stay on track.
Steps to processing Payroll
- Start with the clean Data
The most crucial step for processing payroll is to start with precise data. Do not make common mistakes such as employee misclassifications that primarily happen during onboarding, as they can impact your employer’s health, retirement benefits, and tax withholdings.
- Create a record management process
When running a business, you must keep several types of documentation on behalf of employees. Any selections they’ve made for benefits and retirement needs documentation so that you can make adequate payroll deductions.
An easy way to handle these moving pieces is an employee record management process. Employee records serve as the source of truth for everything from pay rates to deductions. If the information on an employee’s record is incorrect, this can result in an inaccurate paycheck.
You can track employee record-keeping processes by paper files, on-site server, cloud-based document storage.
- Know your total payroll costs
You also need to keep this very important point in your mind, and that is to know your Employee’s total payroll costs. To spot inconsistencies during each pay period, you need to know how much each Employee will cost the business beyond their wages. Always factor in gross wages, benefits, tax and National Insurance withholdings for each Employee.
- Track time and attendance
This is one of the most critical steps to keep your processing payrolls on track and updated. Time components like hours worked determine employee pay. It’s vital to have a streamlined time and attendance process to ensure employee hours are captured and recorded accurately. Don’t forget to track time-related items like lunches, breaks, and accruals so employees aren’t over or underpaid.
You can use various and effective payroll options and integrate it with the employee attendance management system and track time.
Options like time cards, timesheets, and mobile apps meet the needs of all kinds of workforces.
- Produce and distribute payslips.
You must produce and distribute all of your Employees and workers a payslip to detail their:
- Gross pay
- Net pay
- Hours worked for that pay period.
Payslips can also include your employee’s National Insurance number and tax code, their pay rate, and their pay and deductions year-to-date.
- Calculate Deductions
After that, you have track time and attendance in place. The next step in your payroll process is calculating deductions. To do this, you will first need to understand the different types of deductions. There are various types of deductions: Pre-tax deduction, tax deduction and post-tax deduction.
Now, here is the time to calculate deductions. It is very simple for calculating this :
Disposable Income = gross pay – taxes.
- Pay Employees
Note that you have calculated all the tax deductions for your Employee take-home pay, and now, it’s time to start running payroll.
Whether employees prefer direct deposit, pay cards, or printed checks, it’s crucial to ensure that employees’ compensation is accurate and timely. Depending on your pay frequency, make sure you consider holidays when processing payroll.
- Submit Payrolls tax payments and filings
Once the payrolls have been sent to all of your company’s employees and workers, it’s now time for employers to submit payroll tax payments and filings. Employers must send payroll taxes withheld to the appropriate government agencies.
You also have to pay the employer portion of payroll taxes. This quarterly federal tax return reports an employer’s federal income taxes and FICA taxes withheld during a calendar quarter.
These guides to payroll processing help you stay ahead of changes and accommodate rapid expansion. As demand increases for businesses to perform complex, labour-intensive tasks, automation can offer a way to save time and increase overall efficiency. So, You have to use an effective HR software that comes with payroll integration like Carbonate.