The 101 of Payroll: Everything You Need to Know

If your organization has employees, you need to do payroll. Yes, there is no way you can avoid it. But what exactly is payroll?

Without any doubt, employees are one of the most valuable assets an organization has. Employees fuel the growth of a business. But, how do they do it? Well, they are the ones who are at the forefront, dealing with your customers. They are the ones who are executing day-to-day tasks and bringing in new business. When employees do so much for an organization, it becomes very crucial that they get properly compensated, and compensated on time. And, what ensures timely compensation for your workforce for their time and efforts? The answer is payroll!

For a layman, payroll might simply seem like a routine of writing and dispatching a few checks every month. That’s about it, ensuring the employees are getting paid on time. However, once you are entrusted with the responsibility of processing payroll for an organization, you will come to know that payroll is way more complicated than it may superfluously seem to you.

So, what does payroll entail? Here are four payroll components that will help you understand how payroll works:

1. Salaries, Wages, and Incentives for Your Workforce

The first and foremost thing in running an organization is taking care of an employee’s pay. You can pay an employee an annual salary, or alternately, an hourly wage. Salaried employees of your organization get a fixed amount every pay period. Wage-earners on the other hand, get paid on an hourly basis. An employee’s paychecks may reflect their gross earnings, man-hours invested, overtime they earn, incentives, benefits, reimbursements of expenses they incur, and net pay, yuan pay group etc.

Incentives can be introduced in addition to salaries as special payments and commissions to further motivate employees.

2. Paying Taxes – On Behalf of the Employees and the Organization

When payroll is processed for an organization, taxes are deducted from the income of the employees as per their tax profile. This is very important to pay the taxes to the concerned authorities on time.

Apart from the employee taxes, there are also employer payroll taxes that must be taken care of and paid on time. Because of this, the total employer cost is more than the gross wage for the employers. And as such, a thorough knowledge of this is required to make better decisions in terms of hiring and budgeting.

Payroll is one of the most important yet complicated of all the different business processes. Although all the organizations work to run their payroll process in an efficient way, mistakes chime in and cause serious consequences. To ensure that businesses are not getting fined for being non-compliant and their employees have a pleasant payroll experience, it is crucial to understand the entire process and automate it with the help of payroll software.

3. Paying the Employees

As employees are the most important resource for any business, it is of paramount importance to pay them consistently, that too, without delays. Irrespective of the size and stature of a business, payroll plays a pivotal role in maintaining the morale of the employees.

Because of its magnitude, direct deposit with the help of payroll software is ideal. Online paystubs thus generated saves both the employees and the employers a lot of hassle.

4. Reporting to the Concerned Authorities

Specifying salaries and wages, withholding taxes, and disbursing payments are not about it in payroll processing. Organizations need to report all of this to the concerned authorities on a regular basis.

These reporting requirements vary from business to business based on the size and the type of business. To skip the hard work of filing the returns yourself, you can use payroll software for payroll processing.

5. Making Your Way through Crucial yet Complex Payroll

For sure, payroll is full of intricacies and time-consuming, but there is a way out of this. No matter how you run payroll for your organization, hold on to the basics can help you get in control, and properly track business finances. This is important, as running payroll accurately is necessary for your business’s overall health and success.

Although payroll is quite complex and detail-oriented than it usually seems from outside, businesses find it more cost-efficient to employ good payroll software instead to take care of the process.