Payroll has always been a time-consuming job, regardless of the size of your workforce. According to studies, small business owners spend more than 10 hours each month merely completing employee payroll. Payroll automation might now uncover huge efficiencies for small and medium-sized businesses. Organizations at this level are primarily concerned with expansion, product quality, and new business sectors. Regular chores such as payroll can create enormous tensions (particularly towards the end of the month), diverting from the real work at hand. With most payroll procedures being iterative and formulaic, there’s little reason for SMBs to be hesitant to implement payroll automation.
According to the latest survey, 97% of employees stated they would prefer to continue working remotely, at least part-time. Working from home is not always as straightforward as working in a local office, despite its popularity and obvious benefits. Streamlining payroll management in a remote context, for example, might present a number of challenges. Small and medium-sized enterprises, on the other hand, can adopt an effective remote payroll administration solution.
This blog will go through the essential aspects of payroll management as well as suggestions for improving the process. In addition, we’ll look at software solutions as the most potent answer to payroll concerns for small and medium-sized business owners.
What exactly is payroll?
Payroll is a list of employees who get compensation from the firm. Payroll also refers to the entire amount of money paid to employees by the company. It entails the following as a business function:
- creating an organization’s compensation policy, including flexible benefits, a leave encashment policy, and so on.
- Specify pay stub components such as basic, variable, HRA, and LTA.
- Obtaining additional payroll inputs (for example, the organization’s food provider may offer information on the amount to be recovered from employees for meals consumed).
- The real computation of gross compensation, statutory and non-statutory deductions, and net pay
- Revealing employee compensation
- Depositing TDS, PF, and other dues with the proper authorities and submitting returns
Payroll errors and omissions
Mistakes, whether in computations or in payroll records, might result in inaccurate net pay for employees or improper tax payments to the government. All solutions are completely unpleasant and expensive for a corporation. Furthermore, payroll is included in your business costs in your accounting, so efficient payroll administration has a direct impact on the accuracy of your accounting.
According to The Workforce Institute, an estimated 82 million workers—more than half of the U.S. workforce—have had a payment problem throughout their employment. This is frequently the result of employers lacking the requisite skills or understanding of payroll management. The good news is that those gaps can be remedied with appropriate training, outsourced assistance, and dependable software.
Exempt employees are incorrectly classified.
Employees are classified as either exempt or non-exempt. What is the primary distinction between exempt and non-exempt employees? Exempt employees do not get overtime compensation. Non-exempt employees must be paid overtime if they work more than 40 hours in a workweek, according to federal law. State laws may vary.
When a non-exempt worker is wrongly classified as exempt, the worker is denied overtime pay. As a result, if a worker is a non-exempt employee, you owe them compensation for overtime. You may also have to pay fines or penalties.
Overtime earnings were incorrectly calculated.
Are your employees properly classified as such? Are the employees appropriately designated as non-exempt? If this is the case, you must pay them overtime. You must also appropriately compute overtime.
Employers are required under the FLSA to pay employees 1.5 times their usual rate of pay, sometimes known as time and a half, for any hours worked in excess of 40 in a workweek. For example, if a worker is paid $10 per hour, you must pay them $15 per hour of overtime ($10 x 1.5).
Overtime wage regulations in some localities may differ from state and federal legislation. Overtime earnings earned by employees may be subject to fines and interest if they are not paid. You will also owe the employee’s salary.
What are the stages of payroll processing?
A payroll officer must plan meticulously. There are always continuous duties that require attention, as well as the need to constantly monitor changes to withholdings, contributions to social security funds, and so on. Pre-payroll, actual payroll, and post-payroll activities are the three steps of the process.
- Creating a Payroll Policy
Many factors influence the net amount to be paid. At that point, the company’s numerous policies, such as its pay policy, leave and benefits policy, attendance policy, and so on, come into play. To achieve regular payroll processing, such policies must first be carefully specified and authorized by management.
- Getting Feedback
Interaction with numerous departments and employees is required during the payroll process. There might be information such as mid-year wage revision data, attendance data, and so on.
- Sources of payroll input
In smaller businesses, these inputs come from a single source or from fewer teams. With a bigger firm, however, the effort of acquiring data may appear daunting. Input collection is not an issue if you use a smart payroll system with integrated features such as leave and attendance management, an employee self-service portal, and so on.
- Validation of Input
After receiving inputs, you must validate the data in terms of adherence to business policy, the authorization/approval matrix, appropriate formats, and so on. You must also guarantee that no active employees are overlooked and that no inactive employee data is used for salary payment.
- Calculating Payroll
The confirmed input data is then entered into the payroll system for real payroll processing at this point. The net salary after appropriate taxes and other deductions is the outcome. Once the payroll process is complete, it is always a good idea to reconcile the data and double-check for accuracy to avoid mistakes.
The Post-Payroll Procedure
- Statutory Obligation
All mandatory deductions, such as EPF, TDS, and ESI, are deducted when payroll is processed. The money is subsequently sent to the appropriate government entities by the corporation. The frequency varies according to the type of dues. In most circumstances, dues are paid through challans. When all dues have been paid, the return or report is filed. For example, while filing a PF return, an ECR is created and lodged.
Every business keeps a record of its financial dealings. One of the primary operating expenditures that must be disclosed in the books of accounts is the salary paid. It is critical to ensure that all salary and reimbursement data is correctly input into the accounting or ERP system as part of payroll administration.
Salary might be paid in cash, via check, or by bank transfer. Organizations typically give employees a pay bank account. Once payroll is completed, you must check that the company’s bank account has adequate cash to make salary payments. Then you must send a salary bank advice statement to the appropriate branch. This statement contains information such as the employee’s ID, bank account number, wage amount, and so on. If you use payroll management software with an employee self-service portal, you can quickly publish payslips, and employees may log in to their accounts to retrieve the payslips.
Once you have completed the payroll run for a given month, the finance and top management teams may request information such as departmental employee costs, locational employee costs, and so on. As a payroll officer, it is your obligation to dive into the data, extract the necessary information, and distribute the reports.
Before hiring your first employee, you should learn about payroll administration.
Payroll tasks begin even before an employee signs an employment contract with your company. When you begin your first round of interviews, you should have decided on salary, prospective benefits, insurance plans, policy documents, and contracts. You must understand what personal information should and can be gathered throughout the onboarding process. Data protection and the processing of this sensitive information are typically governed by applicable legislation.
Proper IRS paperwork must be obtained throughout the employment process: a W-4 form for an employee and a W-9 form for an independent contractor (if the amount paid for the services exceeds $600).
Various tax regulations apply based on the nation or state, so if you hire personnel from elsewhere, you must be aware of the applicable payroll taxes and employment rules. This is especially crucial in today’s economic situation, as more and more individuals prefer the remote work paradigm.
What Types of Payroll Management Options Are There?
When it comes to payroll management, you have two options: the old, done-by-hand method or the more modern, computerized method of employing specific payroll software for small businesses. Each approach has its own set of potential problems, but they each offer certain advantages. Let’s take a short look at the advantages and disadvantages of each choice.
- Payroll Processing by Hand
This method requires logging employee hours manually, computing necessary taxes, and delivering paychecks (or direct deposits) yourself.
- There are minimal start-up expenses because all you need is a computer with Excel (or other similar software). You may also use a payroll record book if you want to complete everything by hand.
- A manual payroll technique, which is readily available and requires no additional purchases, may be simply deployed at any moment.
- Possibly minimal continuing costs are another advantage. You will not have to pay a third party or contractor to manage your payroll.
- Manual payroll systems are difficult to expand and can fall behind as your company grows.
- A system operated completely by people is prone to mistakes, and even the tiniest mistake can result in thousands of dollars in fines. Manual payroll methods are time-consuming and will only become worse as your company grows.
The Payroll Automation method automates employee hour tracking, tax computations, and paycheck (or direct deposit) distributions by utilizing cloud-based payroll software.
- Because all computations and operations are handled by an automated payroll application, it is simple to scale.
- While employing an electronic payroll process, mistakes are reduced since most payroll software checks for compliance concerns while automatically computing your paycheck.
- Payroll processing times are reduced thanks to an automated system that calculates employee payouts in real-time.
- There is no need for third-party services to charge you for each transaction; you can do it all yourself with a few simple clicks. This saves you a significant amount of money.
- There is no program to install, and you can quickly access it through your browser.
- Initial training is required to become acquainted with the procedure.
- Workers must be trained to get comfortable with the self-service platform, which will require employees to cease bugging the company for things like paystubs, basic payroll knowledge, and so on.
How Do You Choose Payroll Software?
If your company is growing and you’ve decided to install payroll software, you should proceed with caution. Failure to do so may be costly to your company, ineffective in addressing concerns, and may cause more problems than it solves.
- Identifying your requirements
When you start looking at certain payroll services, you need to first clarify your expectations. If a payroll platform cannot satisfy all of your fundamental requirements, it should be removed from consideration. Below are some examples of common fundamental requirements.
- Considering Your Needs and Wants
As your company expands, you’ll want to make sure you’re not switching from one piece of software to another to manage your personnel. As a result, you will want a system that provides answers for your future demands while also ensuring that any information supplied or changes made anywhere are mirrored across the whole system. This method will not only save you time in the future, but it will also consolidate your HR processes and operations.
Payroll administration for small and medium-sized businesses
We’ve established the importance of a robust payroll system. Now, let’s look at how a strong payroll administration system may be established and managed successfully. What alternatives do small and medium-sized business owners have? You have various alternatives available to you. We’ll give you a quick rundown of the many types of payroll systems.
Create standard remote work policies.
The first step in effectively handling payroll for your remote employees is to create the policies and procedures that will govern the whole process. Payroll processing may be challenging, especially when teams are dispersed around the world. Your organization may be employing various systems for worldwide payroll, time and attendance, and other functions that are vulnerable to change as it grows.
Remote working regulations may be established by deploying time-tracking software, including off-site working policies in your company handbook, and requiring employees to sign an employment contract. You may also strive to boost productivity by setting clear goals and timelines for your employees to complete their tasks.
Maintain accurate employee records.
Payroll relies on accurate recordkeeping. While most employee information is acquired during the onboarding process, workers must additionally notify you when their information changes.
Begin by ensuring that workers understand how to update their information, whether through an employee portal or a paper form. All modifications must be recorded in your payroll system. If your program includes an employee portal, you should be automatically alerted to the change. Whenever an employee hands you a printed form, you must manually update the entries.
Keep track of staff hours.
If you have hourly workers, you must keep track of how much time they spend on the job. You may use whichever method works best for you as long as it displays the entire record. Several payroll programs integrate with time-tracking applications or contain time-tracking functions, sometimes for a fee. Paper time sheets or an old-fashioned time clock can also be used.
Payroll consultants from a third party
If you can’t afford a full-time specialist right now but need someone to handle the end-of-month payroll computations, hiring outside help is a better option. This strategy is typically more advantageous for small businesses with few employees. Yet, it isn’t the only incentive to cooperate with third-party payroll specialists, since those collaborations may provide a business owner much more than simply payroll services.
Connect the payroll system with the accounting software.
Payroll software that is good can automate numerous procedures and interact with other corporate functions such as HR and accounting. Because data is automatically aggregated from several sections into one system, these solutions can make your company’s operations easier and less prone to mistakes. Hence, rather than being a standalone component, your ideal software is part of a larger system (part of your overall system).
Bookkeeping services? tailored to your needs
Accounting systems, such as QuickBooks or Xero, frequently provide for basic payroll operations, although they may lack some capabilities required for efficient payroll administration. As a result, many business owners opt to employ different payroll solutions.
Paying payroll on time is critical when your company expands globally. With Velan, you can effectively develop a remote payroll administration solution for your worldwide workforce a remote payroll administration solution for your worldwide workforce.
We are a firm that understands the obstacles that employers face, and we are devoted to assisting you in resolving these issues at the lowest possible cost.