The Intricacies of Payroll Processing

Payroll processing refers to a series of steps taken to compensate or reward employees for their contribution to the production of goods and services. One of the duties of an employer towards an employee is the payment of wages, bonuses, and salaries. Without this, employees will not be motivated and this will negatively affect the production process. Ultimately, revenue will drop and the business will have no profit to record.

The amount paid to every worker depends on a number of factors such as

• The prevailing hourly rate in the province or state
• The number of hours worked within the period
• Deductions such as taxes and fines.

The payroll process

Anybody who works deserves to be paid for his/her efforts. To start with, workers also have bills to pay and a family to cater for. However, before issuing a paycheck to workers, certain deductions must be made. What this means is that the amount written on the paycheck is the net income of the worker. Some of the deductions include state taxes, federal taxes, insurance, and other levies. It does not end there. The total amount generated as tax must be remitted to the internal revenue service (IRS) and this is recorded as the personal income tax of the employees in that establishment. It is not enough to remit tax and submit figures to officials of the internal revenue service, the filing must also be done and this can either be done manually or by e-file.

After preparing a salary schedule and removing deductions, payment can be done by one of two ways. The first is to issue a paycheck in the name of the employee with the amount written a reflection of the net earnings of the worker or by direct deposit into the bank account of every worker. Workers get notified by SMS or email alert of payment into their bank account. The later is usually easier and more preferable because employees wouldn’t have to seek permission to visit the bank to consummate transactions since they can simply make withdrawals using their debit cards or bank withdrawal slips.

Payroll processing can either be done manually or by use of special software. The manual method requires meticulousness and focus when doing calculations. It must, however, be said that it is not as accurate as of the use of a payroll software. The software is programmed to do calculations and remove deductions automatically giving you the net income as final output. The inaccuracy of figures gotten from manual computation can lead to serious reputational damage especially when wrong tax figures are calculated and submitted. The IRS does not take it easy with firms found guilty of under-remitting tax. The sanctions are always stiff and severe. Another downside of manually handling your payroll is the speed, ease and convenience as it’s not as fast as the use of payroll software. It may cause a delay in payment of workers which is not something that is appreciable since almost all employees look forward to payday.