If you’ve never handled payroll, you could be feeling a bit intimidated. But don’t worry. Payroll processing is simpler than you imagine. This guide will walk you through the process step-by-step, so you’re ready and confident to go for payday.
What is the purpose of payroll processing?
Payroll processing System is the process of managing employee pay. It includes everything from entering an employee’s details into your payroll software, to paying them for their wages.
If you’re a small-scale business owner, odds are you’re in charge of the payroll. If your team grows and payroll gets more complicated you may decide to hand over the task to an HR manager or accountant
Many business owners invest in the payroll accounting software to assist with management and make sure that payroll is in compliance with federal and state laws. There are many tax implications to consider when handling payroll, which is why it is beneficial to get professionals to help.
If you’re curious about how processing payroll for employees works there are eight essential steps from beginning to end.
1. Select a Payroll processing system
There are three primary system of payroll that include manually-run payroll the outsourcing of payroll as well as payroll software.
- The manual payroll is done in a manual manner, typically on paper or using an Excel spreadsheet.
- Insourcing payroll is when you hire a third party to manage everything from bookkeeping to payroll taxes.
- Payroll applications is different for each the plan or product. The majority of them offer basic payroll support to extra service for payroll which could include time tracking and HR-related services.
Before you choose one over the other take into consideration factors such as expansion of your business employees’ benefits, business growth, and the complex nature of the state’s payroll tax as well as laws. The more complex the components and calculations are, the more likely that you’ll have to buy payroll software program or outsource your payroll completely.
2. Make a Payroll processing policy
Before you draft the policy for your payroll, make sure you look over the state labor law, the state’s overtime law and the federal laws on labor. The most frequent FLSA violation is the non-payment of overtime that can occur in the course of your work if you aren’t aware of the laws.
Here are some additional things you should include into your pay policy:
- Pay dates, as well as the duration that each payment period lasts and the date you pay employees following the date.
- Withholdings and payroll deductions as well as how benefits you offer affect the pay of your employees.
3. Collect employee details
If you employ employees, make sure you have their I-9s, W-4s as well as state withholdings. when your payroll contains items like health insurance for employees, as well as retirement savings you’ll require documents that prove the employee has been able to approve additional deductions. If you’re planning to provide direct deposits this is the right time to secure the employee’s consent and gather their bank details.
4. Set up direct deposit
Direct deposit isn’t for everyone however, it’s a great option for employees as well as their employers, which is why it’s a common practice. As a business owner you can arrange the direct deposit via your bank directly or through your employer’s payroll provider. In the event that your workers have chosen to opt to deposit direct and want to make direct deposit, they’ll need to provide you certain information. It includes the name of their bank as well as their account number, the account sort (checking or savings) as well as their routing number for their bank. After you have that information you need, your next task is upload this information into your payroll software or to your bank.
5. Establish a time tracking system
One method of keeping the records is to record hours manually, and then ask employees to note down the times they are able to clock to and from. If not, you could consider using the time tracking program which keeps timesheets for employees. you’ll need to get employees trained to keep track of their time in the earliest time possible.
6. Timesheets of employees to be collected
It’s time to conduct your first payroll. This means you’re ready to collect time cards for employees. If they’re paper-based time cards it’s necessary to add up the hours, looking for any errors and then transcribing them into those of your payroll files. If the time card is digital, it’s the right time to transfer the data into your payroll program. According to the product they may have been stored in your payroll program, just waiting to be approved.
7. Accept and submit payroll for employees
Approval is the most crucial process to run payroll for employees who work hourly. This is the chance to ensure that all hours worked are accounted for and that payroll is accurate. After you’ve accepted the all the employee’s time card and time cards, you’re ready to process payroll. Then issue the employees with payments.
8. Report and update the payroll records
It’s time to review your pay records ,after the paychecks are gone the window. Also, you must show the tax payments you’ve made.
Records of payroll are crucial in other ways too. For example they are required by it is the Age Discrimination in Employment Act (ADEA) obliges employers. To keep track of all payroll data over a period of three years. This information should include any employee benefit plan as well as any written system of merit.
What is the time frame to complete payroll?
Processing payroll can take a few hours, depending on the amount of employees as well as the tools you employ. The more manual your process, the more time it’ll take.
Automated time-tracking and payroll tools can cut down on time by a significant amount. The majority of software for Payroll processing calculates the tax on your payroll for you. And which can take several hours if you do it manually.
As Organization helps you with contrasting tasks is considerable, auto in payroll will make it all easiest for you. Try HRMS for one of the best payroll management systems. Well, acquire a show with us and review your payroll system!