Payroll is an important document that is used by organizations and companies to perform day-to-day staff management activities. It is a document that contains a list of all the employees of a company who receive remuneration for work carried out or services offered to that company. It provides a summary of the entire money paid to staff by a company within a specific time. A payroll provides the following functions.
- It contains a company’s remuneration strategy, which may include bonuses, leaves, and deductions.
- It provides a detailed payslip, which can be used for various uses. It also provides a detailed breakdown of salary or wage.
- It is used for paying salaries or wages.
- It is used to collate payroll-related inputs.
- It is used to determine actual remuneration.
For effective management of financial activities, a company of more than a staff must possess a comprehensive payroll. The primary function of payroll is to assist a company in the timely payment of staff wages and salaries. It also helps with other essential activities, such as income tax, unemployment tax, and social security. In most cases, having a payroll is mandated by the state in which a company operates. Certain jurisdictions require that the company must keep payrolls within a specific timeframe.
Payroll management is the administration and management of staff financial reports, such as wages, salaries, deductions, bonuses, and other relevant financial records. It also involves a continuous review and update of the payroll database to ensure that the status quo is always captured with respect to the remuneration of staff.
Maintaining a payroll by a company is extremely important for day-to-day activities and also for adherence to jurisdictional requirements. In most cases, companies maintain a payroll database via payroll application software that is usually semi-automated and easy to use. The importance of payroll, owning, and managing payroll, is highlighted below.
Payroll Management Process
The payroll management process is what a company does in the process of administering and implementing payroll functions. In this process, the business uses software applications to record employee details and manage salaries, track hours, manage to leave, bonuses, and deductions among other functions of payroll management. The process also includes complying with legal requirements related to employee payments, including income tax.
The payroll management process also includes putting in place a mechanism and system to redress employee grievances. The payroll process is integral to companies establishing integrity and financial stability. Where there is poor payroll management, organizations open themselves to potential fraud.
Payroll Management Process Stages
The process of payroll management requires careful and meticulous planning. Continuous review and monitoring of changes to details relating to specific employees concerning payments, deductions, and other financial payments. This payroll management process consists of three distinct phases, which are before, during, and after the payroll management activity.
- Before payroll processing- Various factors are considered, which include bonuses, leaves, and other benefits. The determination of these factors is based on the approval of the decision-makers of the company. Payroll generated in small companies is affected by fewer factors. With more prominent companies, the payrolls usually require software applications that ease the entire process. In both cases, all data processed must abide by company policy and procedure.
- During payroll processing- Verified data is used. This stage involves calculations, taxes, bonuses, and deductions. Validation and verification of all amounts are done to ensure accuracy and avoid mistakes.
- After payroll processing- All deductions are made here. The total funds budgeted on the payroll are disbursed through the relevant payment channels.
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