How does the payroll system actually work?

 

A payroll system assists in managing everything, which concerns the process of filing employment taxes and paying the employees.  

They are set in a place to keep regular track of the worked hours, withholding taxes, calculating wages & other deductions, printing as well as delivering checks & paying the government employment taxes.

Software often gets used for the payroll & needs minimal input from the employers end. Employers are needed to input hours and wages worked & then the software makes use of this information or data to automatically perform the calculations & deduct the withholdings.

Most of the payroll system software gets automatically updated when the tax laws get altered or any change is made & even alerts the employers when filing of particular tax forms are needed.

What is meant by payroll process?

The Payroll administrator requires a detailed planning of the entire payroll procedure. There always remains work management ongoing tasks, which requires in depth attention and continuous monitoring of the changes to the tax withholding, various contributions & other things to be considered in the process.

Payroll procedure can be divided in 3 stages - pre payroll, actual payroll & post payroll activities

Read Also | Using a cloud based payroll software in the UAE? Here are some benefits

Defining the policy

In their starting stages, it is crucial to establish an organization’s policies like pay policy, benefits and leave policy & attendance policy.

Make sure these policies are highly well defined & signed off by the organization’s management for the standard payroll processing to get established.

Accumulating input data

Interaction with various departments & payroll is mostly a crucial part of payroll procedure.

These are people who can endow you higher access to essential information such as mid year salary revisions & attendance data.

The procedure may be more consolidated in smaller companies & more robust is bigger organizations.

Gathering such data can get overwhelming but the payroll software has integrated features such as attendance and leave management & employee self service portal to make the task easier and way simpler.

Read Also | How to Find the Right Cloud Payroll Management Software for Business?

Input validation

Next step in the procedure is to check the input datas validity & whether it adheres to the company’s policy. It is the crucial time to ensure that no active employee is missed and even no inactive employee is included in the salary payment.

Actual payroll process

Calculation of the payroll

It is the stage in a payroll procedure where the input data is put in the payroll system for it to actually process the employees payroll.

It is a procedure that results in net pay getting generated after making necessary deductions & taxation adjustments.

Once the procedure ends, it is best to practice to reconcile values & verify accuracy to avoid any occurrence of errors.

Post payroll procedure

Statutory compliance

When processing all the statutory deductions such as EPF or Employee Provident Fund, ESI or Employee State Insurance and TDS or Tax Deduction at Source, the payroll administrator transfers the amount to the government agencies.

Frequency of the procedure can differ based on the dues. Most of such fees can be made via particular forms, which is set in place. Once all the dues get paid, return reports get filed.

Payroll accounting

It is crucial that every company keeps a record of all the financial transactions for payroll procedure. One of the crucial parts of the operating costs is salaries to be recorded in the accounts book. Payroll management must also make sure that all the salary & reimbursement data/info is entered accurately in the organization’s accounting or Enterprise Resource Planning or ERP system.

Payout

Salaries can get paid out by check, cash or even bank transfer. Generally, employers deposit salaries directly in the employees’ bank account.

After the payroll gets processed, an organization requires to make sure their bank account has sufficient funds to make the salary payments.

Next measure is getting the salary bank advice statement to the organization's branch. This statement involves details such as bank account number, employee ID and wages amount.

If you are using a payroll software system that has ESS portal or Employee Self Service portal, it will make it simpler to publish the payslips & employees can log in and access their account & payslips easily.

Read Also | Global payroll software solution: 6 reasons to implement it

Reporting

Once you have ended the payroll for a specific month, your finance department or the management team may ask for the report on various things such as location employee costs or department employee costs.

Payroll administration will require to accumulate the data/ info & extract the needed info to share such reports.

Dynamo is the most efficient, cost effective and user-friendly cloud payroll software. It is fully customizable for operational needs and most efficient HR and Payroll system today. 

It operates within Microsoft Dynamics 365 Finance and Operations. Dynamo can be truly called a solution as it is the one stop shop for a payroll system. 

Dynamics Business Solutions (DBS) is certified Microsoft Dynamics partner in UAE, we take pride in our ability to develop and deploy the right business solution that matches global client’s requirements.

To know more, speak to our expert at Dubai: +971 4 447 5525 Abu Dhabi: +971 2 222 2100 or inbox us your query at dynamo@dynamics.ae OR visit www.dynamics.ae