Payroll accounting can be more complicated than you think. And the process is more than a list of employees and the wages you pay them. A thorough payroll system will need to include things like up-to-date tax information and details about statutory legal requirements you have to follow. It should also process various payments automatically.
What is Payroll Accounting?
Payroll Accounting is the process of calculating and distributing wages and other monies to employees in your business and other interested parties (regulatory boards etc). It is often completed by dedicated software with monies paid directly to a beneficiary’s bank account.
Payroll accounting will take into account all legal and tax obligations of the employer/employee to ensure payments are correct. Issues with payroll can disrupt the harmony of a workplace and cost a business time and money.
Payroll Accounting from an employee’s perspective
Most employers look at payroll from a purely business perspective. It is an expense they need to pay, and the process helps them understand their tax obligations.
But payroll is also important for employees because it is how they get paid. As an employer, it is incredibly important to understand this. Each employee on payroll is a person with their own needs, not an expense. Payroll issues can easily antagonise staff and make them unhappy. Having an unreliable payroll accounting system is a surefire way to disrupt the morale of your staff.
What should a Payroll Accounting System include?
There are many Payroll Accounting Systems out there that you can purchase, each offering a variety of different functions. If you are looking at buying a system, here are a few features you need to ensure your system includes:
- A way to pay money to employees and other interested parties automatically. There’s no point in having a payroll accounting system that forces you to initiate bank transfers manually.
- Information about tax codes and National Insurance rates for employees. These should be easily amendable if required to keep them up to date.
- A way to simplify tax paperwork. Some payroll software applications allow you to submit tax returns for your business and make payments for your employees automatically.
- A way to manage employee holiday and sick pay. If holiday/sick pay rates are different from standard rates, then these should reflect in the system.
- A way to process expenses. If you require your employees to claim for out-of-pocket expenses, the payroll system will need to reflect this. It should also allow for the easy adding of expense claims by your HR team.
- A way to add new employees and remove those leaving your employment easily. It should also be able to handle various HR processes for each automatically. This can include things like the sending of correspondence and the issuing of P45s, etc.
Benefits of Using Payroll Software
There are many benefits to using good payroll software, including:
- It reduces the time your HR team has to spend on tasks.
- It automates many of the processes required to run payroll accounting. This can include things like sending letters and paying tax. Automation features can reduce the amount of work required by your HR team.
- It reduces the cost of IT by lessening the need for an in-house IT team.
- Many payroll software solutions allow access anywhere in the world through the cloud.
- Payroll software makes it easy to update details with changes automatically processed.