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HRMs and accounting professionals can spend close to 80 hours every year on payroll processing. This is not only a significant overhead expense but also takes manpower away from more pressing duties.
Thus, payroll optimization should be a key goal for all businesses.
When an employer pays the employee, it is important to maintain the financial record. This record lists the salary, bonuses, leaves, and other emoluments.
The 5 basic steps in processing payroll are:
While the above seem simple, in practice, they can take a lot of time when done manually.
When HRMs or accountants manage their payroll manually, they come face to face with the following issues:
Accurately factoring in the salaries and employment benefits of different employment types.
To address all of these concerns, companies need to take up payroll optimization.
Plus, on-time salary payments are a major motivator. Thus, when employees get their payments on time, it helps increase employee productivity.
The best way to optimize payroll and the payment disbursement system is by opting for payroll software. This not only streamlines the entire payroll processing system but also makes it scalable. On top of that, it also allows easy integration with existing accounting processes.
While many believe that the traditional spreadsheet route is sufficient for their business, this will not stay true as the business expands in size. With an increase in the number of employees, the time it takes to do the payroll will increase. Further, accuracy may also suffer due to an increase in the volume of work. Indirectly, this will lead to an increase in overhead costs.
Thus, it is always a better idea to step away from traditional payroll management systems and instead go for cloud-based solutions. Some of its benefits include:
Scalable and flexible design.
Remote accessibility, no matter your physical location.
Automation and efficiency in payroll processing.
Compliance with tax and labour laws.
Easy integration with other accounting and HR processes.
Some of the must-have features for a payroll software are:
By automating the payroll processing system, you can significantly save on the overhead costs of running a business. Further, an automated process will increase the overall efficiency of the payroll management process. In the USA alone, almost 4% of workers, or 82 million peopl,e have faced issues with payroll.
Further, transactions are made directly from the business account of the company to that of the employees. Thus, no person needs to go to the bank, fill out deposit forms, or stand in line. Plus, once the transaction is complete, the system generates a digital payslip.
The payroll management system can be integrated with the employee attendance and leave management systems. This will help extract employee data, such as the number of working days and the leaves workers are entitled to. In turn, this will help remove manual data entry and increase the accuracy and efficiency of the process.
When operating in any country, following the law of the land is a must. In India, the legal landscape is slightly more complex. To protect the interests of the workers, the Indian government enforces EPF, ESI, Income Tax, and the Minimum Wages Act. Thus, employers need to follow the payroll-related regulations mandated by these.
To add, all businesses should stay up to date on all changing labor laws. This will help maintain compliance and avoid penalties. Further, legal risks of potentially violating any norm can be mitigated by maintaining proper documentation.
When learning how to make payroll, it is important to know which tax deductions to account for. For a payroll process in India, this includes TDS (Tax Deducted at Source) and its calculation. The exact details of these are laid out in Section 192 of the Income-tax Act, 1961, which deals with TDS on salary.
Employers need to file payroll taxes on time to avoid penalties. Further, they also need to maintain records of the same for audit purposes and to avoid penalties. Alongside GST and other tax considerations for businesses, Income Tax for employees is a major tax for businesses.
Finding affordable payroll solutions is the goal for startups and small enterprises. While some think a manual approach is more budget-friendly, it can also lead to errors, which can be costly. Further, it has the potential to take time away from more productive activities.
Though getting payroll processing software may seem expensive at first, it has the capacity to tackle all of these. Hence, small businesses that go for payroll optimization can save costs in the long run. To further save on the costs of getting a payroll processing software, companies can outsource the payroll system.
Thus, well-trained accountants manage their employee payroll or salary payments. This ensures on-time payslips, payment processing, and accuracy.
For large and medium businesses, the payroll management process is a task that cannot be achieved by a single person if done manually. Further, their payroll process steps are usually more complex than those for a small business.
In a medium or large business, there are employees working from multiple locations. Since the payroll management process is usually done from a central location, it can pose a challenge. Further, the accountants and HRMs also have to account for employee benefits and incentive structures for large teams. The third challenge is managing the payroll for an ever-growing workforce.
Thus, opting for payroll processing software or an outsourced payroll service is a smart choice for these businesses.
When done manually or on an unsecured system, the risks of payroll fraud and data breaches remain. Thus, implementing cybersecurity measures in payroll systems is a necessity.
With secure payroll processing methods that contain encryption and access controls, the threat of cybersecurity issues is managed to a certain extent.
Further, instead of licensing payroll processing software for themselves, companies can also enlist the services of experts by outsourcing their payroll management process.
How to make payroll on time is a concern for many small businesses since timely salary payments are a major factor that motivates employees.
Further, businesses can deploy employee self-service portals for payroll-related queries. This will help provide clarity on salary structures, bonuses, and deductions.
This will help improve the employee experience by creating an efficient payroll system.
When taking a step into the future, payroll optimization can undergo the following:
Businesses often wonder how to make the payroll management process simpler and streamlined. The best answer is to opt for payroll optimization either with suitable software or by outsourcing payroll to a company that uses it.
Evaluate the benefits of opting for payroll optimization by licensing software vis-a-vis outsourcing the task, and take the best route for your business.
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