Payroll Processing is a complex task for any firm especially if you are a business with a large workforce. Any errors in processing and tax payment can cause regulatory consequences due to strict compliance. The manual process cost can be significantly high and chances of human error are always there in salary and tax calculations. You have to keep up with changes in regulations and tax obligations. Hence, even if it is a small business firm, it can take 5 hours per pay even after having an expert. Fortunately, there are ways to simplify this process.
Let’s Understand the Payroll Process.
The payroll Process takes care of all the parts of paychecks to the workforce. How it is processed depends upon the firm’s system. It can be manual or automated. When an employee is hired by a firm, from the day of service, the calculation of wages begins. It includes the calculation of basic wages, overtime, withholding tax, deductions, benefits, bonuses, and more. There can be an hourly-based system or a fixed periodic payment system or a hybrid of both. Therefore, the assistance of professionals is essential to ensure compliance.
Let’s Modernize the Payroll Process
Reducing payroll inefficiency and tracking key performance indicators (KPIs) of the function has become an important requirement of companies so they can reinvest their resources in more crucial tasks. Firms are now adopting automation of paychecks and end-to-end solutions which are more suitable for their work culture and within their budget. Though firms outsource or hire a professional, they are focusing on streamlining their system to make it more compliance-based.
There are various practices to simplify this process. Here are the steps which may help the business owner to simplify the payroll process.
1. Prepare an effective Payroll Budget
The budget plays an important part to forecast salary for the upcoming year and as a tool of cost analysis as it consists of 20-30% of business cost. After reviewing the previous year’s remuneration and considering expected hiring, increments, bonuses, benefits, overtime, withholding taxes, and deductions, the budget is prepared. Creating a remuneration budget helps to avoid any unexpected surprise future payments. An effective salary budget will help you to keep an eye on costs while giving raises to someone or where to make cuts due to budget constraints.
2. Keep a separate Bank for Payroll
In larger and medium-size corporations’ the quantum of transactions are high on a day-to-day basis also the number of employees is more too. Combining the payable bank account and salary account is not a good option unless staff is limited. Having a separate bank account will help in bank statement reconciliation and in salary reconciliation as you don’t have to process large data. Also, an excess layer of EFT security over there as it is directly deposited on the employee’s account. Only specific people can have access through these accounts. Also, the power of the fund distribution is in control. One who is reconciling the account may not have access to the payment of salary account so the risk of internal fraud is minimized.
3. Creation of Payroll policy and managing records
The payroll policy gives an understanding of procedures to the employee of the company. It includes administration of salary, timekeeping method, paycheck schedules, break periods, benefits, deduction criteria, advances, holiday pay, overtime pay, and payment methods. It has a definite set of rules for salary-related activities to have appropriate internal controls. Having a concise policy helps to defend the firm from any payroll lawsuit. When an employee joins the firm, the firm has to maintain adequate documents regarding tax deductions and retirement plans. Maintaining a signed copy of the employment contract, tax forms, and policy is essential for compliance. For that defining process of document management is essential for a large workforce. Data can be maintained in paper files or on the onsite server or on the cloud depending upon the size and requirement of the firm.
4. Maintain regularity in payments
Timely payment of salary is essential to boost the morale and productivity of employees. Whether it is hourly-based or fixed payment, regular deposits create stability in staff. Their faith in the financial integrity of the company increases too. To avoid potential legal obligations, strict paycheck schedules are advisable. You can avoid lost productivity costs, training costs, advertising costs, legal penalties and fines, attorney fees, and reputation damage by paying an employee on time. To have a strong relationship between employer and employee and to have an employee on your side in downtime of business, payment regularities are important.
5. Automation of payroll process with the help of software
Payroll automation ensures that salary is paid on time and taxes are deposited to government authority on time. Apart from this to avoid manual calculation errors and the possibility of human error in data management, salary software is an essential requirement in a firm. It collects data, organizes it, and maintains data securely with firewalls. Various cloud-based payroll software is available in the market with customization options like QuickBooks-Payroll, Gusto, One pay, XERO, ADP Workforce, etc. They provide integration with a time management system like HRMS & HCM, so salary can be calculated automatically at the time of scheduling. Such software provides assistance in the calculation of remuneration till the direct deposit of salary in the employee’s account and taxes to the government. Cloud software also throws reminder mails when deadlines are approaching. The employee can check their benefits by having access to the software directly and can claim one when it’s due. You can also control the rights of accessing software as per positions. Hence, automation is advisable.
6. File your taxes electronically.
The firm has to deposit tax withheld within the deadline in accordance with the law. Filing your taxes online is easy as various forms are now available in accounting software plus confirmation for every filing is available. Connecting bank accounts with software and providing tax website access makes the deposit of taxes much easier. Such software also provides the facility of filing payroll returns periodically. Some states have a mandatory requirement of filing taxes online. Cloud-based software also provides the facility to access and deposit taxes anywhere and anytime so for emergency submissions it will be helpful.
7. Outsource your payroll
When there is a large workforce in a firm, maintaining payroll can be stressful for staff members, at that time the firm can think about outsourcing the process. Outsourcing payroll is a cost-effective solution. They provide end-to-end solutions with cost control tools. When the firm is in a growing phase having a systematic process is important for maintaining relationships with employees. Outsourcing can save software purchase and maintenance costs. Firms can focus on more important tasks rather than stressing about the deposit of paychecks and taxes.
Even if you have hired a professional to maintain your payroll, an In-depth understanding of the process is required and a trusted team of advisors is required to check all the things are in place. We at Nimblefincorp will help you streamline your process in a cost-effective manner. We provide an accurate customized solution. We collect your employee’s information such as the hiring date, positions, pay rates, and taxes, and calculate each employee’s salary with taxes. We process real-time and manual payroll as per client requirements. Informing clients that deadlines are approaching, and submission of taxes and filing returns comes under our responsibility. We will provide you with end-to-end solutions for payroll at Nimblefincorp, so you can focus on improving your productivity.