Example Of A Payroll System
January 12, 2016
You must pay your employees through a payroll system, but the type of system you use depends on your payroll needs.
You must pay your employees through a payroll system, but the type of system you use depends on your payroll needs. The size of your company and your knowledge of payroll tasks have a lot to do with whether you choose an automated or manual system or whether you turn the job over to a payroll service provider.
An automated, or computerized, payroll system can be stand-alone software or payroll software integrated with human resources and accounting features. From your work site, you enter your employees’ payroll data in the system — including personal information such as Social Security number and address — and salaries, work hours, pay rate and tax-withholding information. The software calculates paychecks based on the data you entered and enables payment by live check, direct deposit and pay cards.
With an automated timekeeping system, you can input the hours into payroll software. Payroll software withholds taxes from your employees’ wages and calculates complex items such as wage garnishment, supplemental wages and pretax deductions. The software lets you track specific employee benefits, print payroll registers and tax reports and perform W-2 processing. This system improves efficiency and accuracy over manual systems.
A payroll service is an external system. For a fee, you outsource your payroll tasks to the provider. Depending on your needs, the provider either processes your entire payroll, including your payroll tax matters, or manages some aspects of your payroll.
Payroll companies generally offer online services, and some offer a do-it-yourself approach: You run payroll from your mobile phone or office and print your own paychecks, if you wish. Instead of having to buy software, you use the supplier’s online system. Other payroll companies offer more limited online services. For instance, you upload your employees’ hours in the supplier’s system, while the supplier processes your entire payroll and forwards the paychecks to you. This system can save time and money and help you reduce penalties for mistakes in wage, hour and tax calculations, because the provider generally has experts in those fields. You still must verify the provider’s work and stay informed about payroll matters, because you could be held liable for the provider’s mistakes.
Processing your entire payroll by hand, or manually, may work if you have few employees, such as five or fewer. You need just a few items to establish this system, such as bank checks, stationery and payroll journals for record keeping. You calculate wages and deductions by hand, which can be risky because payroll calculations can be complex.
Since you do not have software to aid you in your calculations, triple check each payroll for accuracy before you actually pay your employees. Do not hand-write annual W-2s because the Social Security Administration’s scanner requires the use of a specific font to read them; use a typewriter instead. For record keeping, maintain only hard copy files. This system is easy and inexpensive to establish.
If you have any questions, do not hesitate to contact our Payroll service.