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From Complexity To Simplicity: Navigating The Payroll Function With An End-to-end Approach
Direct deposit, introduced more than four decades ago, is a significant innovation in the world of payroll processing that stood out as a true game-changer.
It revolutionized the way employees receive their hard-earned money.
However, fortunately, recent years have seen technology permeate the payroll realm, bringing forth exciting developments in time reporting and flexible payment options. The future of payroll is poised for further transformation, ensuring a seamless and rewarding experience for both employees and employers.
Handling payroll is a vital but intricate task for businesses. In today's unpredictable economy, ensuring timely and error-free delivery of employee paychecks has become a paramount concern.
Organizational leaders must offer their staff clear, concise, and comprehensive guidance on accessing payroll information to minimize payroll mishaps.
Additionally, HR departments must remain vigilant about staying abreast of evolving government policies or consider leveraging the services of a global payroll provider, particularly in a hybrid-remote work environment, to streamline ...
... payroll information for employees residing in different states or countries. By adopting these practices, businesses can navigate payroll management challenges with confidence and efficiency.
While payroll processing may appear daunting initially, rest assured that paying your employees doesn't have to be complex.
Simplifying Payroll: Definition, Standard Terms, and Processes
Payroll processing refers to the process of calculating and distributing employee compensation, including wages, bonuses, and deductions. It involves ensuring accurate payment calculations, tax withholding, compliance with labor regulations, and maintaining records of financial transactions related to employee compensation.
Here are some standard payroll terms you will encounter while dealing with your company's payroll function.
Standard Payroll Terms
• Gross Pay
The gross salary is the complete sum of all the elements of an employee's compensation package. It represents the total salary amount before any compulsory or optional deductions, such as income tax, provident fund contributions, medical insurance premiums, and other similar deductions.
• Net Pay
Once the gross pay has been determined, it is necessary to deduct government-mandated withholdings, such as income tax and provident fund, from the gross pay. The remaining amount that an employee receives after these deductions is referred to as net pay or net salary.
Overtime is the additional hours worked by an employee in a company that exceeds the standard hours set by government regulations. The policies established by the company determine the compensation or additional remuneration an employee receives for working overtime.
• Pay Period
Pay periods are specific timeframes during which employee wages are calculated and payslips are issued. These periods are scheduled and repeated either every two weeks or every month.
Payroll management encompasses administering, analyzing, and calculating employee compensation, including salaries, benefits, and performance-related bonuses.
• Contractual Employees
These individuals are typically engaged temporarily and do not hold permanent employee status. The specifics of their employment arrangement are outlined in the contractual agreement.
Payroll Processing: An End-to-End Approach to Elevated Payroll
Payroll management is an essential aspect of any organization.
It involves complex calculations, compliance with legal regulations, and timely processing of employee payments. As businesses grow and the workforce expands, managing payroll becomes increasingly challenging.
However, you can streamline your payroll function and ensure accurate and efficient processing with the right approach and measures. Here are steps to consider while building a robust payroll processing function, simplifying the entire process, and saving valuable time and resources.
• Understanding State and Federal Payroll Laws
Irrespective of your industry, you must be aware of and comply with the payroll laws at the state, federal, and local levels.
It is advisable to conduct thorough research to understand the specific laws that apply to your situation.
Take the time to ascertain the minimum wage set by your state, the method for calculating overtime, the provisions for paid or unpaid leaves, the requirements for workers' compensation, and the frequency at which paydays should occur according to your state's regulations.
Additionally, it is crucial to determine whether you are obligated to withhold funds for disability insurance and local income tax. By familiarizing yourself with these legal requirements, you can ensure that your payroll processes adhere to the applicable laws and regulations.
• Choose a Payroll Schedule
Typically, there are four primary pay schedules available: weekly, biweekly, bimonthly, and monthly.
It is crucial to carefully assess the advantages and disadvantages associated with each schedule before finalizing your decision. Several factors, including the nature of your workforce, industry, budgetary considerations, and payroll procedures, should be considered when determining the most suitable payroll schedule for your organization.
Considering these variables, you can choose the optimal pay schedule that aligns with your business requirements.
• Collect Employee Paperwork
Payroll processing requires specific forms from both current and new employees.
These forms include the W-4, I-9 Employment Eligibility Verification, and State Tax Withholding (if applicable for state income tax withholding). Additionally, if you opt for direct deposit, you will need the banking information of each employee. Some payroll services allow employees to submit these forms electronically for additional convenience.
• Calculate Pre-tax Pay
Now it's time to perform some calculations to determine the gross pay for your employees, which is the amount they will receive before taxes. The specific calculations will vary depending on the types of workers you employ.
o For hourly employees: Multiply their hourly pay by the number of hours they worked during the pay period. Be sure to deduct any hours they didn't work if they took time off.
o For salaried employees: Divide the annual salary by the number of pay periods in your yearly payroll schedule.
o For commission employees: Determine their hourly or salaried base pay and add their commission earnings for that particular pay period. The commission earnings will be based on your unique commission structure.
• Figure out tax withholding
The paperwork provided by your employees will indicate the amount of earnings to be withheld. Typically, this includes federal, state, and possibly local income taxes and FICA taxes encompassing Social Security and Medicare. It may also involve deductions for court-ordered child support and tax levies. Moreover, if your state mandates unemployment insurance, it is essential to calculate this amount, as you will be responsible for paying it on behalf of the employer.
• Determine net pay
Net pay, or take-home pay, is the actual remuneration employees receive after deductions from their gross income. To determine the net pay, you can subtract the applicable deductions from the gross revenue. For instance, if an employee has a gross salary of $5,000 and $1,250 is withheld for taxes, their net pay will amount to $3,750, which is the amount they receive on payday.
• Distribute paychecks
The next step is to distribute the net pay owed to your employees after processing your payroll. Various methods are available for this purpose, with direct deposit being the preferred choice for many. To proceed with direct deposit, ensure you have the bank details provided by your employees. However, it's important to note that some employees may still prefer traditional paper checks. If that's the case, you can simplify the paycheck distribution process by utilizing a payroll service. To explore the top payroll services suitable for small businesses, find out more about the subject here.
• File taxes
As an employer, you must fulfill your tax obligations on behalf of your W-2 employees. These obligations include paying taxes to the IRS, state tax collection departments, and local government, depending on your operational location. Additionally, you are responsible for FICA (Federal Insurance Contributions Act) or Social Security and Medicare taxes, which are divided between you and your employees. Another tax you must pay is the FUTA (Federal Unemployment Tax Act) tax, which covers unemployment insurance at a rate of 6% for each employee. Fortunately, deducting the taxes paid for your employees is possible, providing some relief.
• Pay into benefits
When it comes to employee compensation, a portion of the funds withheld from their paychecks is allocated towards employee benefits, provided that your organization offers them. These benefits encompass various offerings, such as health insurance, health savings accounts, retirement plans, and flexible spending accounts. It is your responsibility as an employer to ensure accurate and timely payments towards these benefits, depositing them into the appropriate accounts on a per-pay-period basis.
• Maintain payroll records
According to the Fair Labor Standards Act (FLSA), it is mandatory to maintain specific payroll processing records for nonexempt employees for a period of three years. Nonexempt employees are eligible to receive minimum wage and overtime pay if they work beyond 40 hours in a week. These records should include information such as employee pay rates, hours worked, vacation pay, overtime payments, and holiday pay. To ensure convenient accessibility, storing all employee records securely in a centralized human resources system is recommended. This allows for easy retrieval whenever necessary.
Simplifying your payroll function is a strategic move that saves time and resources, minimizes errors, and ensures compliance.
We at Exela HR Solutions provide a wide range of services, including accurate payroll calculations, efficient tax processing, and seamless HRFM (Human Resources and Financial Management) integration. By leveraging our extensive expertise, strategic approaches, and state-of-the-art technology, we are dedicated to handling your administrative tasks with utmost precision and effectiveness.
Here are the benefits of choosing Exela HR Solutions as your HR services partner:
• Ongoing management of payroll operations
• Mass data corrections and uploads
• Management of compensation, benefits, and annual talent cycles
• Proficiency in legal and compliance matters
• Efficient risk mitigation
Speak with our experts to learn more about our services: https://ow.ly/FYyy50PxmSI
Source & to read more: https://ow.ly/yhVi50PxmQc
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