Types of Payroll Management & Methods
The management of a company’s payroll involves all functions and processes by which its employees receive their salaries or any other form of financial remuneration.
These functions also include the reconciliation and balancing of payroll data as and calculation and depositing of taxes. A payroll accountant is also responsible for taking care of records keeping, wage deductions and verifying the reliability of pay data.
Methods of Payroll Management
There are four major processes followed by organizations to calculate gross wages and salaries as also the deductible amounts for each employee.
While some companies prefer conventional manual methods, large corporations use state-of-the-art software for payroll processing. The various methods processes are illustrated below:
Employing an accountant for payroll management: As a specialized function, a qualified payroll accountant with a diploma or degree in accountancy or finance is often employed by many organizations to look after payroll operations only.
He/she is fully responsible for all activities pertaining to the company’s payroll. The professional is required to have a sound knowledge of basic accounting principles as also globally accepted accounting standards. It, however, adds to organizational costs.
Using a manual system: This system involves making manual entries in traditional payroll ledgers, spreadsheets, and a calculator, instead of state-of-the-art computerized aids.
Used by firms in the manufacturing and construction industries to calculate pay for onsite contractual labor or very small businesses where payments are made on a daily/weekly basis. The process, however, is time-consuming, tedious, risky, and error-prone. Even during the age of tax cuts and a solid economy this is nothing to write home about.
Outsourcing payroll operations: Some companies even outsource their payroll activities to a 3rd party which takes full responsibility for all payroll accounting activities. A poignant way to save cost and time and works well for those organizations with more than 1,000 employees.
The outsourcing organization takes care of payroll records & taxes analysis, processing of medical claims, employee provident fund, insurance processing, and audit planning & procedures.
Implementing payroll management software: Automated, state-of-the-art software is nowadays available to perform all actions that go into the payroll process. At the click of a mouse or the touch of a key, payable amounts, and deductions are calculated in seconds.
The pay slip too gets generated in no time, and there is little room for error. Moreover, the data gets automatically validated by the software. However, the person using it needs to be properly trained to ensure maximum efficiency and accuracy.