How Does Payroll Processing Work?
Your payroll process directly impacts the success of your company. Accurate and timely payroll processing exudes your responsibility towards employees. Not just that, it highlights how you care about your workers and boosts your image within and outside the organization. A robust payroll processing system increases employee retention, engagement, and trust. Plus, it saves costs and ensures compliance with existing laws and rules.
What is payroll processing?
It’s the process of compensating workers for their contribution and time for your organization. Payroll processing includes the calculation of wages, employee benefits premiums, withholding taxes, and delivering payment through direct deposits or other options. A robust payroll processing software application automates the steps and streamlines the whole process for small, medium, and large businesses alike.
How does payroll processing work?
When it comes to processing payroll, it’s the same for all ventures regardless of their size. For instance, small business payroll processing involves all the same steps as mega business payroll. Here’s a list of steps that you must take.
Gather details of your employees from the first day of their work. Popular items in the information list include their social security number, state withholding form (in case applicable), Form W-4, bank account details for direct deposit, and benefit selections.
Monitor time and attendance
Most companies have time and attendance software to track and manage their workforce. Automatic management software becomes imperative in companies with complex pay practices such as weekend pay, shift differentials, overtime, pay per piece, critical shift pay, and other aspects.
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Assess and approve time
An efficient payroll process encompasses a supervisor’s assessment and approval of time-cards before the processing of payroll. Review each employee’s time-card minutely. In addition to this, document and retain the supervisor’s approval.
Rectify errors if any
You may be highly attentive in spotting mistakes. Still, your payroll recording may contain errors, especially if you run a venture with hundreds of employees. It’s best to check each employee’s time-card for mistakes. By doing so, you can avoid blunders. Even if the entries are correct, it gives relief that you didn’t overpay or underpay your workers. So, don’t miss this vital step.
Compute wages and deductions
When the pay date ends, compute the gross earnings of all employees. Check the employees’ hours and the rate of pay for the calculation chore. Also, consider shift differentials, overtime, and other practices in place.
Computer and deduct taxes, garnishments, benefits premiums, and other deductions and/or withholding. Finally, withhold from the wages and compute the next pay.
Submit or process payroll
If you’ve workers who receive checks, print paper checks and disburse those checks to your employees with pay stubs. If you pay all of your workers through direct deposit, send the payroll file to your bank for processing. A significant number of employers pay their employees through checks as well as bank transfers. Find out your company’s practice and act accordingly.
After processing payroll, pay federal and state payroll taxes. Don’t lag behind in this respect. If you do so, you’ll have to bear late filing penalties and fines. Submit timely deposits to avoid any such issues at quarter-end.
Many employers don’t bother about records once they pay their employees. This point holds in the case of newbie and small business owners. Most of them don’t have much information about preserving payroll records. However, the law requires you to retain records for future references and other situations. So, retain tax and payroll records as per federal and state records retention rules/laws.
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How long does payroll processing take?
It depends on whether you use automated or manual processing and the number of workers you’ve. Employers that use manual methods have a tough task ahead. However, companies that use automated payroll processing systems finish their internal processes within 1 to 2 days. After payroll, it takes 2 to 3 days for wages to get deposited into the employees’ bank accounts. On average, employees get their paychecks within 4 to 5 days after their pay period date.
Can employers delay payroll processing?
Most business owners don’t give a thought to this vital aspect. They take this facet casually and feel there’s nothing wrong if they delay the process. However, employers must pay wages according to their payroll schedules. Any delay can invite costly penalties and fines.
Federal law requires companies to pay their workers quickly for hours worked. Still, state law turns out to be more specific in most cases. So, don’t forget to check your state law to figure out acceptable payroll frequencies. This could be weekly, bi-weekly, semi-monthly, and monthly. Also, find out if any other regulations apply.
What is a standard payroll cycle?
Common payroll cycles include weekly, biweekly, semi-monthly, and monthly options. If you hire workers for the first time, you’ve to decide how often you should pay them.
Weekly payroll leads to 52 checks each year. This cycle is common for employees that command hourly wages.
Bi-weekly payroll involves 26 checks each year. It’s suitable for hourly and salaried workers.
Semi-monthly payroll includes 24 checks each year. This cycle is best suited for salaried employees
A monthly payroll involves 12 checks each year. It’s always and only reserved for salaried employees.
Check hour and wage laws of your state to make your payroll schedule compliant.
What is required for payroll processing?
Processing payroll necessitates a federal employer identification number, a local tax identification number, and a state payroll tax identification number. These accounts let you file and pay the payroll taxes. If you don’t know how to process payroll or feel uncomfortable with the whole process, partner with a reputed payroll processing company. Alternatively, you may use payroll software to ensure compliant and timely payroll. Both options should work fine and resolve your situation.
What are the different types of payroll processing?
Common types of payroll processing methods are hourly, commission, and salary.
Hourly employees get paid for each hour of their work. They’re non-exempt and entitled to overtime pay.
Salaried employees receive a monthly or annual salary. They may be exempt or non-exempt. In other words, they may or may not be entitled to overtime pay.
Commissioned employees either receive a straight commission for their work (for example, a percent on sales) or commission plus the basic salary.
In addition to this, you must figure out which employees are non-exempt and which ones are exempt. Both salaried and hourly employees can be non-exempt or exempt. Here, federal hour and wage rules come in handy. So, go through those rules to avoid issues. It’s also advisable to comply with the department of labor’s guidelines to keep yourself from hefty penalties and fines.
On top of that, you’ve to decide whether you want to offer direct deposit, paper checks, or both. Note that most employees expect direct deposits when they join your company.
Finally, you must determine logistical payroll processing. Manual processing involves too much time and can delay the whole legwork. Even worse, it’s prone to errors. Both situations stand highly undesirable for any company. To avoid all these problems, most companies use a robust payroll processing system such as Paylocity. Payroll providers may teach you the working of the payroll system and how to process your payroll.
Why choose Simplified Payroll and Bookkeeping to process payroll?
Today, you can find many solutions dedicated to payroll processing. Each solution claims to be the best. The sad part is not all systems stand to their tall claims. Some solutions come with a hefty price. The other systems encompass some sort of flaws. You’ll also come across software that involves too many technicalities and complexities.
As an employer, you want a system that’s cost-effective as well as simple. This is where Simplified Payroll and Bookkeeping comes into the picture. The software provides a slew of benefits related to payroll processing.
In addition to payroll, the system includes a menu (list of features) to choose from. Time and attendance are popular and practical features that you may want to use.
It includes pre-built interfaces, so, it’s easy to send and receive data to the systems that you already use.
The solution includes automatic payroll tax filing and payment. It takes care of social security tax, federal tax, state tax, and Medicare tax. So, your whole process of filing and paying tax gets streamlined.
The software comes with enhanced customer service and technical support for small and large businesses. If you face any problem with the system, you can get your issues resolved quickly through a dedicated support team.
Above all, the solution includes employee self-service to quickly access pay stubs, W-2s, W-4s, a lot besides.
Many employers are already reaping the diverse benefits of this innovative software. You could also enlist yourself among those satisfied business owners. So, explore Simplified Payroll and Bookkeeping to capitalize on the varied benefits. Keep your payroll processing task intact, timely, and stay ahead of others.
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