Payroll processing simply refers to a series of activities by which an organization meets its financial obligations to its staff and workers alike. These financial obligations include wages, salaries, net pay and bonuses. It is an established fact that the amount an employee goes home with is a function of the hourly rate, the number of hours worked, and deductions such as federal and state taxes.
While the entire process looks straightforward on paper, it is not without its challenges. A lot of other things are involved such as calculating exact tax amount and remitting the total tax figures to the office of the IRS. While some companies prefer to process payroll weekly, a few others do it semimonthly or on a monthly basis. Regardless of the spacing method you choose, accuracy should be the watchword. Hence, payroll should not be rushed.
A good payroll process should be;
Accurate: This is very important. Information from the timesheet must be properly captured. If an employee works for one hour, he should be paid for that hour worked. If he puts in an extra shift, he should also be paid for overtime. Anything less than this would amount to cheating and the employee will most definitely be displeased. Furthermore, a good payroll must also be specific. What this means is the reason for every deduction must be clearly stated with clear and concise narrations. For example, if $x is deducted for Medicare or Social Security, it must be properly captured in the pay slip, so that all workers have an understanding of why they are paid the amount they receive.
Consistency: A good payroll must be consistent. For instance, if you’ve chosen to process payroll biweekly or monthly or quarterly, you must strive hard to keep up with it. This entails that employees should have an expectation of payment on a specific date or closer to that date. It helps them make plans and preparation. A haphazard pattern is not good for both parties as it could lead to difficulty in tracking payments or audit.
It must meet the needs of employees: Workers do the things they do for money. If your payroll doesn’t meet the needs of your employees, it is important to adjust it. Your payroll should be flexible enough to help your workers meet their financial obligations as at when due. This is called the time value of money.
Ease of retrieval of funds: Access to funds after every payment is made is crucial. A good payroll system should consider the ease at which employees get cash. In lieu of this, so many companies opt for the direct deposit system. This is totally different from the system of issuing paychecks. The direct deposit system ensures workers get notification of payments into their account. This way funds can be withdrawn easily with their debit cards or a withdrawal slip. It also helps the employer because workers wouldn’t have to ask for permission to go to the bank when they should be at work.