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Every employee needs to be paid for the services he provides. For this to happen, the employer must have a payroll system in place. Without it, chaos occurs, as employees will become upset if their checks are inaccurate (or worse, if they don't get paid) due to a haphazard payroll structure. So obviously, there are benefits to be derived from using a payroll system. 1. o The Defintion A payroll system is the method used by payroll professionals to pay employees for their services. Regardless of the type of system used, there are basic functions that must be performed--calculation of hours worked, deductions (401k, health, garnishment), and benefits (auto allowance, vacation, personal time). Manual o A manual payroll system is typically used by small organizations. The primary benefit is that it's very inexpensive to set up and maintain. Businesses using this system do not have to invest in a software or spend money on training classes for the payroll processors. They can also establish their own payroll system instead of adhering to the rules of payroll software. They can log and maintain employee hours and tax records, according to how they see fit. Computerized o A computerized payroll system saves on time and lowers your error ratio. You can enter payroll payment information quicker than with a manual system, and run payroll registers to double-check your information before printing the checks. This allows you to detect errors and adjust them beforehand. Additionally, computerized payrolls simplify tax processing (941s and W-2s) by computing the data for you and allowing you to do bulk print runs. External o Many companies use an external payroll service, such as Paychex and ADP, to process their payroll for them. This eliminates the stress of processing it yourself. Outside services also offer direct deposit services, where employees' paychecks are electronically transported into their bank accounts. Additionally, companies using them do not have to invest money in an in-house payroll software. They do not have to spend the money on in-house processors. Choice o When choosing a payroll system for your company, select the one that benefits you most. Companies with fewer than 10 employees (especially if the hours or salaries tends to remain the same each pay period) generally benefit more from a manual system. For companies with 10 to 50 employees, purchasing a software package is advisable, as long the software is relatively simple to use. A large firm with 50 employees or more should go with an external payroll service. Structure o Once you've chosen the payroll system that works best for your company, you'll want to ensure that your payroll structure is organized and efficient. For manual payrolls, keep copies of all payroll information (copies of checks and types of payments made, including taxes). For computerized and external payroll systems, create various spreadsheets to document each payroll. Do not depend on the software only to maintain your payroll records, as they can malfunction, resulting in the loss of crucial payroll data. TheDisadvantagesofPayrollSystems 1. Employers have to ensure their employees and taxes are paid in an accurate and timely manner. Consequently, they use a payroll system that best suits their needs. Although payroll systems can provide payroll services that are advantageous to the employer and his employees, they also have disadvantages. Outsourced System When an employer outsources his payroll, he assigns a significant amount of the payroll processing tasks to a payroll supplier, decreasing the workload of his payroll department. This is an increasing popular method of payroll processing among employers, particularly among small businesses that lack an in-house payroll staff. The disadvantages of this system include the improbability of contacting a payroll professional immediately. If the payroll company is understaffed and has an abundance of clients, it may become difficult to reach someone when you need it immediately such as when paycheck discrepancies arise.
Storage of files is susceptible to be damaged as well as lost of data. Tallying of time cards will be done automatically by including a computerized employee log-in system in the proposed system which will be responsible in computing the time the employee worked. the payroll staff has to work overtime to help solve the problem. The employer simply purchases the payroll software and hires an in-house payroll staff to do the payroll processing. Time consuming in double checking the consistency of all the reports. In-House Computerized System o An in-house computerized payroll system is equally as popular as an outsourced system. Thereafter. Check printing is done manually on a typewriter and all payroll errors are manually adjusted as well. Difficult and time consuming in keeping up-to-date in taxes and other deductions. The payroll company is also responsible for paying your taxes to the government. Mathematical errors will be prevented by automatic computations that the proposed system will provide and you may not have to worry about having financial or legal trouble. Employees can approach the payroll person directly as opposed to having to rely on their superior to contact the off-site payroll supplier. Payroll System Problem Statement The study specifically seeks to answer the following problems in manual payroll process: Speed in processing payroll tends to be slow. The in-house computerized payroll staff generally has additional tasks such as quarterly and annual tax filings. correcting these errors is an equally painstaking task. you may not know it in time to avoid penalties from the government. direct deposits and payroll database maintenance. The room for error with this payroll system is great. a computerized payroll system. the researchers have come to identify how the payroll works. The main disadvantage of this system is that everything is done by hand. In-House Manual System o Although in-house manual payroll systems are becoming increasingly rare. Then it must verify the calculations. W2 processing. . Hillcrest Baptist Academy. Significance of Study Speed in processing payroll will have a faster performance by means of decreasing the manual input areas. Storage of files will be safe and secured with username and passwords and can easily be accessed. The aim of the research is to provide a specific school. The payroll personnel must add all the hours stated on the employee timesheets using a calculator. it has to determine the wages by hand and use the IRS withholding tax tables to determine the amount of taxes to withhold and pay. unless you have a payroll administrator working on-site to stay abreast of tax filings. it is difficult to always know what's going on with your payroll until the actual pay date arrives. Employers will never have to spend much time in keeping up to date with taxes and deductions because the system will be designed updated to such deductions. some small companies still use them. When glitches in the system occur. Tallying of time cards is done manually. The stress level on the payroll staff can be considerable when payroll issues occur. The proposed system will guide the employer through all the stages of the process. Prone to mathematical errors that could consume much time than it should and could cause financial or legal trouble. Scope and Limitation After several interviews and observations. If taxes are being paid late or incorrectly. which can be costly to the employer. The proposed system will record all data in all reports at the same time so you can make sure they are consistent and it also saves time.Because the payroll company is located off-site. The disadvantages of this system include the employer having to pay salary and benefits to his payroll staff. as opposed to paying a small fee to outsource his payroll.
The manual payroll system they are currently using calculates the payroll for each pay period entirely on paper. and if the business is relatively small. Storing personnel records Most organisations will also keep other data about employees. whether collected automatically as a user or operator logs into a system. Assess the business requirements for payroll software Not every business needs payroll software.. and it will probably consume. under time and any other applicable deductions and additions to each employee s actual earnings. Background of the study Processing payroll can be one of the most complex tasks facing an organization. timesheet systems that record employee attendance or time worked. . delete. Reporting Using basic payroll data. such as records of annual leave. The problem with the manual payroll system is if ever one had committed mistakes. Time recording Payroll systems can also incorporate.such as tax and National Insurance deductions . This allows in-depth analysis of staff costs for the business as a whole. These problems are being encountered by several organizations. payroll systems can provide a wealth of reports.. Planning The ability of payroll packages to provide forecasts means you can plan staff costs and budgets by entering hypothetical numbers to see the exact total cost of an employee.can be completed in a fraction of the time that they would take to work out manually. avoiding the need for a separate software package. or manually entered into an electronic form. and update. Withholding Tax and other deductions Add. and both payslips and annual reports are archived in case copies are needed later.. If there are no complications. whatever input was made from the start will automatically affect the whole calculations. or integrate with. Aside from simply paying employees. Payroll software The advantages of payroll software The most obvious benefit of payroll software is that payroll calculations . companies will need to file taxes. information about hours worked. over time. This type of information is usually associated with the broader human resources function. can be automatically transferred into the payroll system. In this way. PAG-IBIG. together with data on attendance and hours worked. Year-end reporting is also usually automated. They will need to calculate taxes. You can get payroll systems that will record these additional types of information.The system can only do the following: Compute monthly net income. save. across departments and even individual jobs and contracts.. manual payroll calculations can be quite straightforward. submit reports and process year-end data for tax-reporting purposes.
and information on changing legislation that can affect payroll calculations. but you should be aware that using payroll software makes you reliant on your computer system. back-ups of data and disaster recovery plans. in addition to the initial purchase cost. it can save time in producing payroll calculations and may be sufficient for some smaller businesses. It is part of the Basic PAYE Tools package which you can download from the HMRC website. Therefore you will need to plan support.Bought software versus HM Revenue & Customs (HMRC) Basic PAYE Tools package Whether or not you need to buy software depends largely on the size of your business. Payroll software will also: calculate student loan and other deductions produce payslips for your employees produce payment reports to allow you to pay employees. For example. showing the amount to be paid to each employee keep records of payments and deductions produce year-end reports and documentation for you and your employees produce the necessary figures or documentation when an employee leaves y y y y y y . you will still need to input and maintain certain data for each of your employees. If you manage payroll using a computer. What will happen if there's a problem? You should also consider business continuity. Payroll software capabilities Payroll software can do many pay-related calculations. in order to obtain regular updates to tax and National Insurance rates. HMRC now offers a basic calculator for tax and National Insurance contributions. rather than having to carry out the calculations manually. It is always possible to revert to a manual system if there is an emergency. However. consider theexpertise available within your business. Although this cannot yet replace either a manual or computerised system completely. It will also calculate the NICs that you have to pay as an employer. What payroll software can do Any payroll software will take over the routine calculation of ordinary payroll requirements such as tax and National Insurance contributions (NICs). although computerisation provides less opportunity for error. who handles your payroll when the company accountant is absent? You may find it easier to train someone else to operate the basic payroll run if they have the benefit of a suitable software package. that computer will become business-critical. Who will use the software? When choosing the best option for you. as appropriate. It will allow you to pay people at monthly or weekly intervals. and provides this free of charge to all employers. If you only have a few employees. Payroll software usually requires an annual subscription. the cost of the software may outweigh the time you save using it.
ideally. Trial runs and tests. on holiday or otherwise unavailable.What payroll software can't do While payroll software will do automatic calculations for you. You must keep only essential information . The operator should understand the relevant accountancy practices and statutory requirements. This information will have to be updated when appropriate. by employing physical security. you will still need to key in the details for each employee to whom they apply. you may want to consider making arrangements for your business' accountants to provide emergency cover. physical protection such as an office to which access is restricted. Even if the software can automatically calculate some or all of these.it should be kept securely for no longer than is necessary. there will still be administrative work for you to do. Actual payments should only be made with appropriate authorisation. If possible. you will need to safeguard paper-based information. you will need to make changes when their rates of pay increase or decrease. Payroll software Payroll software operation Once computerised. You may also need to enter details of hours worked and overtime. such as payslips. You will also need to change tax codes when notifications are received. Back-up plans You need a back-up plan for when the usual operator is ill. Alternatively. Access to payroll information should be controlled using appropriate passwords and. ideally stored off-site with appropriate security. See our guide on how to comply with data protection legislation. Security There are additional security measures you may need to take. the payroll function should be operated by someone with appropriate knowledge and training. should be destroyed. You should have back-up copies of the payroll data. You may find it practical for security and continuity purposes to run payroll software on a dedicated computer to avoid any disruption caused by failure of other software. In addition to inputting an employee's details when they start their employment. such as a payroll reports. even if your use of personal data does not require you to register with the Information Commissioner. . eg in a fireproof safe. Privacy You need to comply with the Data Protection Act 1998. at least two people should be involved in managing the payroll process. especially if you plan to use manual operation in the event of a system failure. There are also many possible deductions from pay such as employer loans and pensions. Similarly. in order to preserve confidentiality and prevent unauthorised access.
See our guides: introduction to Self Assessment and understanding and using PAYE online for employers. You should check that any software you purchase supports online filing (including P45 and P46). if you need to make other deductions you should check that any payroll software you use can handle these. In addition. Most employers now have to file their PAYE end-of-year and in-year returns online (such as P60s). references. You may also want to check whether the software can handle pension scheme administration.Comprehensive. so it helps if the payroll system offers or integrates with expense reporting systems. such as tax and National Insurance deductions. you may want the software to print payslips for you. If the system can record information regarding car administration. Data presentation All payroll software will tell you the amounts that need to be paid to employees and HM Revenue & Customs (HMRC). education and academic qualifications. look for a package that will calculate and prepare P11D forms and provide the relevant figures to give to employees to allow them to complete their tax returns. If necessary. Reporting Some basic end-of-year reports will be included as standard. accurate and timely reporting can help to reveal any discrepancies. but check that everything you need is supported. such as mistakes in inputting hours. . Multiple usage Smaller businesses may only require support for a single payroll operator at a time. rates of pay and other data. but you should check that multiple user operation is available just in case you need it in future. and tracking sick leave. skills and competencies and training records. Pay intervals Weekly and monthly pay intervals are standard. but check that this information can be used in a way that meets your requirements. but if you have different requirements you should check that these are supported. Payroll software Payroll software functionality Any payroll software will carry out basic calculations for pay. some packages may be able to keep records such as job position history. self-service to allow employees to request or book annual leave online. previous employment history. this can also help with the preparation of data used in completing P11Ds. or just to give you figures for electronic payment. For example. However. Integration Integration with the main accounting system to enable payroll costs to be automatically transferred is highly desirable. Expenses information is required to complete P11D forms. Personnel records Additional features may include the calculation and recording of holiday entitlements.
together with other absences such as maternity. If this is important. HM Revenue & Customs (HMRC) accredited software Ensure that software is accredited under the HMRC Payroll Standard Accreditation Scheme. However. see our guides onunderstanding national minimum wage law andhours. Some will allow a high level of detail in the information passed to the ledgers. if time and attendance information is recorded. This scheme covers accreditation in: calculation of tax and National Insurance contributions electronic exchange of HMRC returns and payments customer service handling of statutory records. For more information on these. check whether it can print onto normal stationery or whether a special size or pre-printed stationery is required. Find out about the Payroll Standard Accreditation Scheme on the HMRC website. For more information on P60s. If sickness and holidays are recorded in the payroll package. . and a whole range of other reports are possible. payslips should be printed on a printer that employees do not have access to. Software can also report on compliance with National Minimum Wage legislation and. then these can readily be reported on too. Payslips Before you acquire any software.Reporting and analysis using payroll software At a minimum. Check whether the software needs special stationery for employee P60 forms at the tax year-end. you may prefer to use security stationery that cannot be read until opened by the recipient. payroll software must produce payslips. managers and even individual jobs. To ensure privacy. In some cases. and if so. It usually makes more sense to print any necessary forms directly onto blank paper or labels if the quantities are small. adoption and paternity leave. Again. allowing accounting to distinguish between departments. It can also be useful to be able to reprint payslips in the event of a problem. it is also useful if you can run pay and personnel-related reports. These factors should take precedence over the temptation to choose existing suppliers. the Working Time Regulations. rest breaks and the working week. credits and deductions y y y y The Scheme is updated regularly and all software packages are tested annually to ensure that they remain compliant with current legislation. how much it costs. Check that the supplier is successful. Choosing a payroll software supplier Payroll software is extremely complex and it is essential that you choose a dependable supplier. financially viable and can provide excellent references. Reports Payroll systems will provide information either on paper or electronically to update nominal ledgers. printing the form onto plain paper is often the better option. you should also check that the software is compatible with such stationery.
It a simple way for information about employee hours worked to be transferred into the payroll system removing yet another layer of manual processing. Suppliers should provide electronic filing for all forms that must be filed electronically. and how and when updates will be made available. it makes perfect sense if you are trying to run a business. Some suppliers have experienced problems with updates introducing bugs that haven't been caught by testing. Another huge advantage of running payroll software over a manual process is in the reporting. Entering hypothetical numbers allow you to compare the exact total cost of an employee under different remuneration . Payroll software also provides the capability of "what-if" calculations. Electronic filing of HMRC returns and payments saves time and trouble. they can be rolled back in the event of any problems. most of the costs will be in operating. Instead of shuffling through endless files let the software do the work. month and annually required reports to be run at the press of a button. If a problem with the software occurs on payday. whilst your payroll staff might not like it. Payroll Software Advantages The Advantages Of Payroll Software Are you an entrepreneur or small business owner looking for a quick fix to managing your businesses payroll requirements? Payroll software can be used to speed up the process of calculating pay. They save you the burden of learning and understanding complex payroll legislation. in particular. This helps in forecasting and planning staff costs and budgets. ensuring that payments are both accurate and on time. You will have to pay an annual subscription for updates on rate and legislation changes. Check how much the subscription costs. it must be resolved immediately. Some companies choose to operate a swipe card door system whilst many others operate on a system login basis. weekly. Support Because of the critical nature of payroll operations. Payroll software completes payroll calculations within a fraction of the time it would take to do them manually.An alternative is to see our guide on using HMRC's Basic PAYE Tools. Check the levels of support offered by the supplier. Electronic filing Most employers are now required to file end-of-year and in-year returns online. so you need to upgrade to a newer version of the software. the cost and response times. Some suppliers only provide updates for a few years. It possible with a lot of payroll software to integrate with your time sheet systems that record employee attendance or time worked. Trouble free payroll processing is a critical need of any business. Costs and updates Whilst the purchase cost should be considered. Find out how long the supplier continues to provide updates. Check that when updates are applied. most systems allow. excellent support is a must. supporting and updating the software.
Sure. fair and timely compensation for a job well done. What are the features and functions of a good payroll system? What are the advantages and disadvantages of computer software versus a full-service payroll provider? And how do you choose the best system for your business? Keep reading to find out. From the very expensive to 100% free and everything in between. Instead of focusing on product development. need a reliable. but always with a strong sense of pride. ledger sheet and calculator. If you operate a very small business with one or two employees then you may be better calculating the payroll itself. Whether the check was big or small.scenarios. Before committing to anything as important as payroll software it s best that you talk with various suppliers to make sure that what they are offering will meet your exact requirements. Payroll duties can be a real burden on a small business owner. the boss is stuck in the back with a calculator and a stack of IRS forms. Payroll. he'll probably quit. If employers fail in their payroll duties. sometimes even weekly basis. That's why all businesses. Some payroll systems also allow more personnel based data to be stored such as records of annual leave and sick leave. But as soon as you hire your first worker. the checks may arrive with less fanfare. quarterly. Then again there are a number of free payroll programs out there. They'll be less productive and suffer from low morale. but nowadays most business owners use either an outsourced payroll service or computerized payroll software. This is the nature of work. Every worker remembers his or her first payday. The only issue with these can be the limited support if things do go wrong meaning that it would be best to learn how to calculate the payroll manually anyway. It is worth noting though that not every business will need payroll software though. but don't have any employees. If you own your own business. . There are a huge number of payroll software providers out there with any number of customised payroll solutions. An employer must make sure that the proper taxes are withheld from each paycheck and that those funds are paid to the right government agency at the right time. there was a deep satisfaction in tearing open the envelope and seeing that dollar sign. And if you make a mistake on an employee's paycheck enough times. Over the years. But there's more to it than just signing a check and delivering it to your desk. you have a responsibility to pay that employee on time and the correct amount. it's possible to handle payroll responsibilities with a pen. at its most basic. Missed deadlines and improper tax filings can result in steep fines and even jail time. and especially small businesses without their own accountants. then you don't have to worry about payroll. customer service and other important business tasks. Complicated tax forms must be filled out and filed on an annually. From the worker's perspective. is the process by which an employer pays an employee for work performed. their workers will be less motivated to fulfill their end of the bargain. Just in case. payroll seems like a simple task. effective and easy-to-use payroll system.
calculating wages. the employer is required to match the employee's contributions. if an employee is paying 6. the Social Security Administration (SSA) or other government agency. the following are the major withholdings required by the government: When an employer withholds taxes from a paycheck. all withheld taxes must be held in a separate bank account or trust fund. then the employer has to pay an equal 6. the W-4 is the first of many forms that you must keep on file as part of your payroll system. As an employer. The employer pays these taxes himself. the W-4 needs to be kept on file up to four years after the employee is fired or quits [source: Intuit]. Withholding and paying taxes is one of the most important responsibilities of the payroll system. when it's time to hand that money over to the government. In the case of Social Security and Medicare withholdings. There are numerous other possible deductions. In fact.2 percent of every check for Social Security. This includes keeping track of hours. or in the case of direct deposit. printing and delivering checks and paying employment taxes to the government. withholding taxes and other deductions. every new employee must be reported to the state along with a completed W-4 tax form. The W-4 determines how many allowances the employee qualifies for when calculating the federal income tax that should be withheld from each check. the employer has to pay federal and stateunemployment taxes (FUTA and SUTA) for each employee. All of this information is highly sensitive. Generally. the bank information and account number where the money is wired. the more dependents you have. like the address to which checks are sent. For example.2 percent. meaning that a good payroll system should also be very secure. You must also keep track of the employee's critical personal information. In the United States. meaning nothing is withheld from the paycheck. To avoid confusing this money with profits or other business income. he acts as the trustee for those funds until they are paid to the IRS. The payroll system starts when a company hires its first employee. withholdings and contributions that can be subtracted from an employee's gross wages and that need to be tracked by the payroll system: y Health insurance or life insurance premiums y 401(k) or other retirement fund contributions y Workman's compensation y Union dues y Vacation days y Sick days y Employee loans y Court-ordered wage garnishments (for outstanding debts) y Child support payments .What is a Payroll System? A payroll system involves everything that has to do with the payment of employees and the filing of employment taxes. In the United States. In addition to matching Social Security and Medicare contributions. the less income tax you have to pay.
it can expect to pay around $50 each pay period. Automated Payrolls grew to become Automated Data Processing (ADP). for basic payroll services. You can see how it might be difficult for a small business owner to keep track of all of these withholdings. payment histories and other features. or $100 a month. The downside is that a payroll service can get expensive. A good compromise between expensive payroll services and time-consuming manual bookkeeping is payroll software. make direct deposits and prepare all employment tax filings. subtract all pertinent withholdings and deductions.At the end of the year. Now the employer is provided with a Web-based payroll account that he can update 24/7. Automated Payrolls. which we'll talk about next. an employer had to call the payroll service with information about wages and hours for the upcoming paychecks. especially as a company adds more and more employees. pay all pertinent employment taxes and still mail the paychecks on time. The first such service in the United States. A basic payroll service will collect wage and hour information from the employer and use that information to calculate gross wages. If a company with 10 employees pays its workers twice a month. Payroll Services A payroll service is an outside company that specializes in every aspect of the payroll process. The Internet has made payroll services even more convenient. which we'll talk more about in the next section. All he has to do is log on to the system. They can take over some of the responsibilities typically handled internally by human resources. like administrating a company's retirement accounts and benefits programs. Some payroll services offer more comprehensive help. print checks. namely the number of employees. The same company can pay up to $200 a month for upgraded services like online reporting. Payroll services keep record of all payroll information and make all of this data available online through reports. They can file new employee forms with the state and help comply with any court-ordered wage garnishment programs. one of the largest business outsourcing services in the world. punch in the hours for the pay period and the data is updated in real time. the number of pay periods every month. direct deposit and phone help. In general. costs are calculated per employee and per check [source:ADP]. The biggest advantage of a payroll service is that takes all payroll responsibilities away from the business owner. and the level of comprehensive service of the services required. an employer uses the payroll system to take all of the wage and withholding information from the previous year and summarize it on a W-2 form for full-time employees or a 1099 form for contract workers. Copies of that form must be sent to the employee. allowing him to focus on other aspects of running the business. The cost of payroll services depends on several factors. was founded in 1949 and relied on primitive technology like electro-mechanical calculators and something called the Comptometer bookkeeping machine [source: Reynolds]. Some payroll services even offer a free phone help line for any questions related to human resources or payroll. The service will also mail out W-2 and 1099 forms and resolve any inquiries from the IRS or other government agency. the IRS and the SSA. . In the past. That's why so many businesses use payroll services.
. 401K. How many employees do you have? If you have fewer than ten employees and their hours stay basically the same from one pay period to the next. see if they can customize their services to better suit your needs. Choosing any kind of business system can be difficult.How To Choose Payroll Systems: Manual. with virtually no start-up costs. When you consider this. You will need to calculate taxes. as long as there are relatively few complex issues involved. and any other applicable deductions in addition to each employee's actual earnings. There can also be additional charges if the software has to be configured specifically for your business. y The final type of payroll system is to use an external payroll service.fifty employees or more . and the software has to be updated annually or whenever new tax laws go into effect. which can be a real time-saver. 3. What accounting software do you use? If your current accounting software includes a payroll processing system. it can pay for itself in larger companies. This protects you from liability in the case of mishandled finances. calculates the payroll each pay period entirely on paper. so you won't need to depend on just one person to process payroll. The disadvantage is that whatever you save on start-up costs will probably be eaten up by the amount of time it takes to process payroll. Check with any potential payroll services to be certain that they will pay any applicable penalties if they make mistakes in remitting tax payments. I recommend Sample Business Plan. Although this is the most expensive type of payroll system. Besides simply paying your employees. you should have a computer which is used only for payroll that can go online without using the same connection as your other computers. the software will calculate payroll taxes and other deductions automatically. but getting a handle on your business plan can help. including submitting all necessary tax payments and generating year-end reports. Most programs will also process W-2 forms for each employee at year-end.do your research to find the right payroll company for you. it's very easy to make mistakes when processing payroll manually. or another employee within your company. Another important consideration is to find a payroll service that is bonded. and if it can be adapted to meet your future needs. To avoid this. When you are researching payroll services. submit reports and process year-end data for tax-reporting purposes. y 2. but it still difficult to do manual payroll processing. check to see what services they offer. If not. The advantage of this type of payroll system are numerous . because you can then integrate all of your financial information into one package. you will need to file taxes. Manual payroll means that you. y The second type of payroll system is computerized. which is very popular. Software. or they are salaried. employees can be trained to run the program more easily. besides the higher cost. Many companies offer computer software that will assist you in processing payroll. A payroll service may also offer a direct-deposit option to your employees. it may be relatively easy to process payroll manually. Also. If your company is large . The advantage of using a manual system is that it is very inexpensive. think about how well the program meets your needs. you may want to use it. and that they can re-process payroll quickly if there are mistakes. If your company has between ten and fifty employees. In addition. The disadvantages are that you still have to input each employee's hours manually. keep in mind that you will still have to transmit employee payment information to the payroll service each pay period. is that security can be an issue if your payroll computer is on the same network as all of the other computers in your company. External Processing payroll can be one of the most complex tasks facing an organization. and if the reports that they provide to you are helpful. for that. but after that.you'll either want to hire an outside payroll service. What types of payroll systems are available? There are three basic types of payroll systems. There are at least free payroll templates out there. and the penalty for mistakes. To determine the best payroll system for your company. Companies such as ADP and Paychex will process your payroll for you. especially mistakes in taxing. The main disadvantage to this system. You will need to input information for each employee when he is hired. consider the following points: 1.fewer potential mistakes and less time spent processing payroll. can be very costly.Payroll companies vary in the services they offer and the amount the cost . In addition. which might otherwise have to hire a full-time employee dedicated to processing payroll. a payroll software package may work well for you. or hire an employee strictly to process payroll. insurance.
be certain that you understand what is included in your basic fee. . Using a combination of the employee information and the provided tax tables. payroll system developers help you maintain tax compliance by assuring your payroll deductions are always calculated using the required rates. With a basic amount of understanding. however. in which the employee designates his filing type and number of exemptions. such as name. Some companies include only the minimally necessary steps in processing payroll.for example. and what is considered extra. You can generate reports that provide you with the exact information needed to fill out federal and state forms for payroll tax remittance. It may take a few tries to find a great fit! Good luck in finding the best payroll system for your company! The Advantages of Traditional Payroll Systems Small businesses have a number of options available when deciding on the best method for issuing payroll checks. and can often be cheaper than manual preparation of payroll due to savings achieved through a reduction of payroll errors. Because a payroll system calculates withholding taxes for you. completely eliminating the need to keep up with changes in tax rate tables and deduction rates and limits. The small business owner with only a couple of employees may think that manually preparing payroll is the best route to save money. if you have many employees at different pay rates. and the knowledge level and time required for an employee to manually prepare payroll. Time Off Tracking A payroll system can track vacation. Also. and everything else is an extra charge. How complex is your payroll? If your payroll is quite complex . the system will automatically calculate all payroll deductions and apply them to the gross pay before issuing a check for payroll. and on trying to keep up with changes. and on different pay scales. especially because the cost of using a payroll service may be out of the owner s price range. and risking a calculation error are a thing of the past with a traditional payroll system. possibly even with different insurance packages from which to choose. the payroll system may generate the forms for you. federal tax withholdings and federal unemployment tax. Cost A traditional payroll system for a small business is usually considerably cheaper than contracting payroll preparation out to a payroll service. Spending hours manually calculating payroll withholdings. as well as accrue vacation and sick time based on the accrual settings you provide. Such a task may be better suited to an external payroll service. sick and holiday pay. However. don't feel tied to it just because that's the way it's always been done. eliminating penalties and interest often charged for filing errors. if you pay state unemployment in addition to federal unemployment. Automatic Withholding Calculations You add new employees to a traditional payroll system by adding information about the employee. address and all information from the Form W-4. By providing you with regular updates. then ask any potential payroll services to quote the job. The key to determining an ideal payroll solution for your business is to be realistic about how much time and money you can devote to this task. Payroll systems also calculate the amount of employer tax due to the IRS and to the state. clerical staff can learn to use a payroll system and the business saves the cost of hiring a payroll professional. small business owners can benefit from using a moderately priced traditional payroll system to prepare business payroll. If a payroll system isn't working for you. This eliminates manual tracking of paid time off and mistakes that can be made with manual tracking. and in some cases. it eliminates mistakes made in tax filings.4. you may spend a lot of time processing payroll. consider whether or not you have an employee in your accounting or human resources department with the knowledge and time to dedicate to payroll. The updates are easily installed into the payroll software and ready for use at the appropriate date. The best way to avoid this problem is to assemble a typical payroll for your company. The payroll system comes preloaded with the Internal Revenue Service payroll deduction tables that supply the deduction rates for Social Security. Medicare/Medicaid. Tax Compliance Payroll system software developers will provide annual updates to the tax tables as the IRS changes withholding amounts.
If the employer wants to make payroll processing easier but has a small payroll. such as retirement and health benefits. the employer would need to invest in more complex software. A manual system means that the payroll representative completes the payroll by hand. which can be handwritten or typed on a typewriter. An external system means that the employer pays a payroll service to process its payroll. Furthermore. blank checks. which should include a description of the provider s services. The software company updates the tax tables as the withholding rates change. the employer also needs to give it power-of-attorney. such as payroll taxes and wage garnishments. it needs to give the payroll provider its bank account information. and generates paychecks and pay stubs for the employer. it may need more than one payroll representative. it has the federal and state withholding tax tables hard-coded in the system. Power-of-attorney gives the payroll service the legal authority to report (and solve matters relating to) its client's payroll tax liabilities and employee benefit plans to the appropriate institutions. The external system employs a payroll staff that performs all calculations. Typically. Department of Labor requires payroll records to be maintained for a minimum of three years. which is usually yearly.S. this system is recommended only if the payroll is small. in-house computerized and external/outsourced systems. Payroll software computes wages and deductions based on the representative s input. Additionally. Additionally. email or mail.S. such as Ultipro. for direct deposit purposes. Additionally. However. If the latter will be handling the employer s payroll tax and/or benefits affairs.About Payroll Systems A payroll system provides an employer with the medium needed to process its payroll. Record-Keeping Compliance The U. fax. With regard to the external system. The IRS requires employment tax records to be maintained for a minimum of four years. Payroll Processing The manual system requires manually computing hourly and salaried workers pay. Types Payroll systems include manual. This includes meeting the U. and voluntary deductions. . statutory deductions. The software also has direct deposit capabilities. frequently used among small businesses. it can hire one payroll representative and buy payroll software. and a calculator to manually process its payroll. Because of its high room for error. once the employer locates a payroll service provider. An in-house computerized system means that she uses payroll software to process the payroll. The employer can file hard copy data in storage boxes with the manual system while the in-house-computerized system stores the data in the payroll software. if the payroll is large. it needs to sign the required contracts. Department of Labor s wage and hour and record-keeping standards. Establishment The manual system is the least expensive to establish. most payroll providers allow their clients to access payroll reports online. the system enables the employer to satisfy the Internal Revenue Service s payroll tax criteria. such as one with multiple pay frequencies and multi-state processing. All the employer has to do is send in the payroll hours via telephone. such as QuickBooks or PenSoft. all the employer needs are stationary. The in-house computerized system eliminates all manual processing.
Outsourced/External The employer uses the outsourced or external payroll system when it hires a payroll service provider. Therefore. On-Site Computerized The in-house computerized system enables the employer to use an on-site payroll staff and payroll software to process its payroll. This can result in penalties from federal and state tax agencies. it&rsquo. depending on the size of the payroll. Furthermore. if the payroll service provider makes a tax error. erroneous tax withholding. if the payroll representative does not understand how to calculate payroll taxes manually. the more errors she&rsquo. it can suffer from not having immediate help when needed. the employer alone incurs the penalty. Furthermore. This system can prove expensive in that may require the employer to pay salaries and benefits to the payroll staff. The system must allow for payroll tax.s timeconsuming because to ensure the payroll is accurate.Misconceptions The employer may believe that using a payroll service provider relieves it of all penalties caused by the latter. if there&rsquo. The employer must invest in and maintain the software. for a flat fee. The main disadvantage with this system is its high room for error. Manual The manual payroll system requires payroll processing to be done completely by hand. Depending on the urgency of the situation. Furthermore. Department of Labor (DOL) requires employers to abide by certain wage and hour laws. which can create clutter. The Disadvantages of a Payroll System A distinct advantage of a payroll system is that it allows the employer to process its payroll and comply with payroll tax and recordkeeping laws. it&rsquo. but most payroll service providers perform paycheck and direct deposit processing. Furthermore. wage garnishments. the employer may not know about it until payday. paychecks and pay stubs are handwritten or printed on a typewriter. the employer may have to wait in line to get any problems resolved. The more manual computations the payroll representative has to make. Furthermore. which can be expensive. Furthermore. plus pay for technical support when software glitches occur. If the payroll service provider has many clients. Services vary by provider. such as federal income tax. the employer may have to pay for training for the payroll staff. withholding. With the payroll being processed off-site. According to the IRS. wages and payroll tax computations. the employer is responsible for all fees and penalties.s possible to miss errors. she has to triple-check the data before printing checks. outsourced or in-house computerized. according to the Internal Revenue Service. Significance It is impossible for the employer company to process its payroll without a payroll system in place. Comparison of Payroll Systems The U. the employer needs a system that enables it to pay its workers on time. this can be frustrating to the employer. Each system enables payroll compliance. The employer has to also pay overtime (if worked) to payroll personnel who qualify for it. Many also offer payroll tax and benefits administration. . reporting and payment occur. time card. processes its clients&rsquo. Paper filing is required with this system. even if a third party made the error. Social Security tax and Medicare tax. but each also has its disadvantages. The payroll system helps the employer to abide by these regulations. payroll. Because the employer is entrusting its payroll tasks to an off-site company.S. the Internal Revenue Service (IRS) requires employers to comply with its federal payroll tax withholding laws. The payroll system can be manual.s prone to make. Regardless of payroll size.s a problem with it. Depending on the complexity of the software. the employer may have to employ a full payroll staff. The latter has a payroll staff that. Even then. and voluntary deductions are done manually.
retroactive pay.Types Payroll departments perform the manual payroll system strictly by hand. All that s required is a calculator for time card and wage and deductions calculations. . the employer may have to pay for additional training to the staff. If the software is complex. the software computes the time worked. which are more likely with the manual system. the system is reliable so long as the entries are correct. Thus. due to dependence on human calculations. which can be expensive. including tax and benefits administration. Disadvantages The manual payroll system increases the risk of payroll errors. A manual payroll system requires computing the time clock data by hand. Many payroll services offer complete payroll processing. wage deductions. The system automatically generates paychecks and stubs and enables direct deposit. a word processor to print the paychecks (if desired).s time is computed accurately. to clock in and out. the automated system eliminates manual paycheck writing. But if he feels more comfortable having an on-site staff. It is critical. double-time. For a flat fee. Payment Calculation The automated payroll system uses payroll software to compute all wages. Specifically. the employee uses a swipe card or badge. the outsourced system allows and necessitates the employer to entrust its payroll to a payroll service provider. Many employers use a time clock to track work hours. What are the Benefits of Automating a Payroll System? An automated payroll system enables the employer to process its payroll through a computerized system. the likelihood of errors exists. The automated system performs all types of payments: hourly. PenSoft. . such as QuickBooks. The former makes payroll processing simpler. All the payroll staff member has to do is ensure the time is transported appropriately and make the necessary edits. which is time consuming. Employers with very few employees can use this system. Since the payroll service provider operates from an off-site location it may be difficult for the employer to get immediate help when needed. The in-house computerized system requires the employer to buy payroll software and pay an on-site payroll staff. If he doesn t want to pay salaries and benefits to an on-site payroll staff. bonuses. Z-Pay. Ultipro and Sage Peachtree calculate gross-to-net earnings based on the data the payroll representative inputs. It is not efficient for larger payrolls because of manual processing. or the hand print or fingerprint method. Considerations Each business owner must assess his needs carefully before choosing a payroll system. The automated time-keeping system allows the employer to import time clock data into payroll software. To reduce errors. the employer gets penalized. Once the entries are transported into the payroll software. The in-house computerized system eliminates manual processing. the system will not pay it. A manual payroll system requires that the payroll be processed by hand and is therefore a considerably slower procedure than an automated system. Time-keeping Transportation Hourly workers are paid according to hours worked during the pay period. Even for a small payroll. the result depends on the accuracy of the input. Therefore. Paper checks increase the likelihood of stolen and counterfeit checks. depending on the size of the payroll. auto payments and tuition reimbursements. and stationery. the payroll representative must check the payroll multiple times before issuing paychecks. especially for a large payroll staff. this increases the likelihood of mistakes. he should decide between the manual or in-house computerized system. therefore. Benefits The manual payroll system is inexpensive to establish. it s best to outsource the payroll. It also does not enable direct deposit an electronic and convenient method of paying employees. The in-house computerized system uses software to process the payroll. not the payroll provider. The software calculates wages and deductions and reduces the likelihood of errors. pay raises. The employer uses a time-keeping system to track hours and pay hourly employees accordingly. Payroll software. overtime. if the payroll service makes payroll tax errors. that each employee&rsquo. the service usually does not have a limit to how many employees it processes for a single client. Typically. if a terminated employee is due severance pay but the payroll representative neglects to make the entry. Notably. commissions. and reduces errors. Plus. blank payroll checks. The employer can use this system to simplify the payroll procedure. The outsourced system relieves the employer of payroll duties altogether. salaries. Furthermore.
This reduces the likelihood of payroll tax errors. Department of Labor requires payroll records to be kept for at least three years. training and maintaining sufficient employment for their business operations.S. Function Business owners use payroll systems to save time and create structure in business operations. deductions or garnishments. Business owners can limit their legal liability to employee lawsuits by using professionals to conduct an internal payroll audit. the U. With an automated payroll system. which can result in fees from the IRS and the state taxation agency. These taxes can be time-consuming and perplexing to compute manually. which consumes time and increases clutter. the software has the tax rates hard-coded in the system. A number of rules are attached to withholding tax calculations. Record-keeping The IRS requires employers to keep employment tax records for a minimum of four years. state and local laws when hiring employees. Payroll processors require business owners to provide information relating to employee payroll. Small businesses can face payroll audits from government agencies. depending on the business owner&.rsquo. biweekly. Considerations Outsourcing payroll is a common activity in small business. Payroll systems can be internal or external. The payroll system represents an accounting or finance function business owners use to pay employees for their labor. similar to other business expenses. Temporary employment agencies usually handle all payroll issues for employees. These professionals usually have specific expertise and experience with payroll systems. The manual system requires filing the necessary payroll data by hand. Social Security tax. The processor will cut payroll checks and withhold taxes according to federal and state laws Expert Insight Business owners should consider consulting with a public accounting firm or an attorney when setting up their payroll system. Medicare tax and usually state income tax. Facts Payroll systems often involve several moving parts in a company. the use of manual checks or direct deposit. The Significance of a Payroll System Employees usually represent the largest expense in companies. Structure is also important in payroll due to the legal liabilities involved with employee payroll. Furthermore. including federal income tax. Business owners develop policies regarding these issues to ensure employees understand the company&rsquo. Most accounting software packages offer customizable payroll modules that help business owners keep accurate records regarding employee information. Payroll software generates and stores payroll and employment tax data. The employer must take mandatory withholding from employee paychecks. monthly).s knowledge and experience. benefit deductions from paychecks and the work requirements for salary or overtime employees.s payroll process. An internal audit helps business owners discover if any issues exist in the payroll system and how to best correct the problems. Business owners must follow federal. Payroll systems save time because business owners can repeat payroll tasks in a timely manner as needed. It calculates the withholding tax for each employee based on the withholding conditions data input. offering compensation and withholding payroll taxes. Business owners simply pay a fixed hourly dollar amount to the employment agency for these individuals. Business owners can avoid setting up a payroll system by using a temporary employment agency or third party payroll processor.Deduction Calculation Salary and wage deductions are a necessary part of payroll processing. Payroll systems outline when the company will pay employees (weekly. . Business owners must present employee information and payroll documents to verify the business owner is following government requirements when paying employees. Features Small businesses usually run their payroll systems similar to larger organizations. Payroll systems allow business owners to create a function that is easy for them to understand and use. Business owners usually spend copious amounts of time hiring. Small business owners can use professional accounting software to help them maintain payroll information.
Payroll processing tasks can include computing hourly pay. A computerized timekeeping system can transport the time into the in-house computerized payroll system. Department of Labor has payroll record-keeping criteria: payroll records should be kept for a minimum of three years. For instance. which includes the use of payroll software. The payroll system enables the employer to process timekeeping data for each applicable employee. In a manual system. This includes adding up the hours worked as shown on the time card or timesheet. but a payroll of one hundred employees might. commissions. Timekeeping o Timekeeping is an essential aspect of payroll. The outsourced system uses the payroll service provider to handle payroll processing.S. Payroll Processing o Payroll processing includes performing many tasks. The in-house computerized system uses payroll software to figure the tax. . the payroll system ensures that they get processed. such as health benefits. The payroll system enables the compliance of these requirements. The Internal Revenue Service requires the employer to withhold and pay employee federal income tax. Furthermore. the employer sends the time information to the payroll service provider to handle the payroll duties. which may vary by employer. pay raises. it can include ensuring new hires and terminations are appropriately processed. The payroll service provider computes the tax if the payroll is outsourced. The in-house computerized system processes them with payroll software. Many payroll services have an online service that allows the employer to access the necessary reports. the payroll representative figures the time by hand. The U. particularly if hourly employees are present. a payroll of five employees may not include processing salary wages and direct deposit. Regardless of the tasks involved. Tax and Reporting Compliance o The payroll system enables the employer to comply with mandatory payroll tax and record-keeping policies. the employer uses the one that best matches its needs. salaries. The in-house computerized system allows the employer to store the data in the payroll software. payroll taxes. If the system is manual. The employer stores payroll data via hard copies in a confidential storage area if it uses the manual system. The system allows the payroll representative to process the tasks necessary to ensure accurate and timely paychecks for employees. If the payroll system is outsourced. payroll department employees figure payroll taxes manually. The payroll system can be in-house and computerized. and voluntary deductions. in-house and manual or outsourced. and those that determine wages--such as timekeeping data--should be maintained for no less than two years. wage garnishments.Uses of a Payroll System o The payroll system allows you to process your payroll. Most states require state income tax withholding. wage deductions. 2. An employer uses a payroll system to process its payroll. parking fees and retirement benefits. A manual payroll system uses payroll department employees who process these tasks manually. The payroll service provider sends the employer payroll reports for each payroll that it processes for the employer. Social Security tax and Medicare tax.
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