Payroll Management

Payroll Management- It is defined as a method of administrating employees’ salaries in organizations. The process consists of calculation of salaries and tax deductions of the employees, administrating the retirement benefits and disbursements of salaries to employees. A payroll system is the medium through which a company processes its payroll. When designing a payroll system, the company should choose a system one that best suits it and also fulfills all the requisitions of law and taxes.

The steps to be taken in designing a payroll system are as follows,

• Payroll requirements should be assessed by the company for the appropriate system to be determined. It is processed by hand in the manual system. The risk of error in this system is high and therefore should only be used by organizations with a relatively small number of employees.
• A company may create a manual payroll computing system. This may be done with the help of standard time sheets or on spreadsheets or office suite program. Checks may be written by hand or by a typewriter. Under this system, wages and deductions are calculated manually and so the company must be familiar with the tax filings and tax deposit laws.
• If the company chooses in-house computerized system, then appropriate software should be acquired. The software can be used to calculate wages and deductions. Moreover it enables direct deposit, prints paychecks and pay stubs, has the tax tables embedded in the system.
• If the external system is chosen by the company, then a payroll service provider must be selected. Generally, these service providers require the companies to upload their payroll hours via the Internet, or send them by fax or email. The providers then process and send the payroll reports and paychecks by each payday. Online access to the system is permitted by some companies, enabling the company to print their own reports and paychecks.

Once the payroll system has been decided upon then comes the calculation of payrolls. The steps for calculating employee payroll are as follows,

• Calculate workers’ pay per hour. Hourly workers are to be paid in keeping with their time sheet or card. This includes regular time, overtime and benefit days, such as vacation and personal time. Regular hours and benefit days should be paid at the employee’s regular pay rate. Overtime should be paid at the rate of 1.5 times his normal pay rate. To qualify for overtime pay, the hourly employee must work for 40 hours for the week.
• Figure salaried employees’ pay. Salaried workers should be paid a set pay for each pay period.

Subtract statutory/involuntary deductions and voluntary deductions from the employees’ gross pay to arrive at the net pay. Voluntary deductions include medical, dental, life and disability insurance; retirement contributions; and parking fees.

Become Vskills Certified Compensation and Benefits Manager. Learn the module “Payroll Management”. Try the free practice test!

Go back to Tutorial                                                                                Go to Home Page