Here are the 7-Steps Quick Guide of Payroll Processing System

What is the Payroll Process System?

The payroll process system is a necessary activity to ensure that employees are paid accurately and on time. Payroll processing system involves time tracking, calculating payroll, withholding taxes, issuing payments and filing tax returns.

There are different methods of tracking time: manual where employers record employee hours; semi-automated where an attendance system records employee time in which managers approve all entries; and automated where a biometric device or a mobile app tracks employee hours which is then recorded by the software

Step 1: Collect employee time data

After all, you can’t calculate employee wages without knowing how many hours they’ve worked. Employee time data is collected using a time-tracking software. The software could be a standalone product or part of an HRIS or payroll system.

Either way, the software automatically collects employee time data using one of three methods:

• • An online timesheet that employees fill out each pay period, manually making any edits as necessary

• • A punch clock that keeps track of when employees start and stop work and calculates total time worked on its own

• • Automated tracking through software installed on every computer in your company (which tracks mouse/keyboard activity and monitors computer access)
    

Step 2: Compare employee hours with approved work schedules

In your payroll management process, make sure every employee’s timesheet matches the approved work schedule. The data that comes in from employees is compared with the actual time the employee was expected to work, and any discrepancies are addressed with those employees. If one of them forgot to enter their hours on their timesheet, they’ll need to manually enter that data. This will ensure they’re paid for all the hours they worked and aren’t paid for any hours they didn’t work. You’ll also use this step to calculate overtime pay so you can make sure no one is shortchanged or overpaid.

Step 3: Calculate gross pay and deductions

First, use a payroll calculator to figure out gross pay. Gross pay is an employee’s total pay before deductions. This can be as simple as multiplying regular time worked by the hourly rate, or it can be more complicated if you have overtime or shift differentials. You should also calculate any additional compensation that may need to be added to the check such as bonuses or commissions.

You can then calculate all of the deductions for each employee’s paycheck. Also, deductions include income taxes, social security and Medicare taxes, garnishments, and any other amount that must be withheld from an employee’s paycheck. The amount of these deductions depends on the amount each employee earns in a given period and their individual tax information which you will find on their W-4 form. If you process a lot of payroll runs, it would make sense to invest in payroll software that can help with this task every time you run payroll.

Step 4: Prepare payroll reports and accounting journals

• • Prepare payroll reports and accounting journals

After running the payroll software and receiving approval from your HR person, you should prepare accounting journals for payroll. For this purpose, you need to create a general journal entry (source document) for each expense account that you’ve used in the process. Also, make sure that there are no outstanding invoices or vendor bills related to employee benefits in order to capture all expenses together with their accounts payable. In other words, this step requires submitting an electronic report to your accounting team that contains information on what accounts have been charged in the process and how much money is spent on them. So this report will help them create an accurate balance sheet and ensure that your business keeps its books clean.

Step 5: Calculate employer taxes

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Step 6: Transfer funds to pay employees (and tax authorities)

A. “Transfer the funds to pay employees”

This step involves transferring the appropriate wages, net of voluntary deductions and taxes withheld, to each employee’s bank account (or issuing a check).

B. In this step, you’ll make all the other payments made by your payroll process: transferring tax withholdings to federal/state tax authorities and any other savings accounts or retirement plans that are part of your company’s compensation strategy.

Step 7: Update employee records

• • Update employee records: After you’ve updated your payroll software, it’s time to consider the archive of employee’s records. If an employee is no longer working with you, make sure to delete their name from the list. Make sure to update any contact information saved in case of future correspondence.

• • Update tax details: Keep up-to-date on what taxes need to be withheld and paid for each employee.

• • Update pay details: Your employees’ pay will change as they’re promoted or get new responsibilities at work. Be sure that your payroll system reflects this accurately so that every worker is getting paid fairly and appropriately for their contributions to the company.

• • Update bank account details: Make sure that any changes in your employees’ banking information go into effect as soon as possible so that nobody misses out on getting compensated!

Payroll management system is easy to use, fast and accurate!

Having a payroll management software solution in place will streamline the process and save you a lot of time. This tool automates everything from employee rate updates to tax calculations. It’s also easy to understand and use. Plus, the system is fast and accurate, ensuring that paychecks are handed out on time with little or no errors. A reliable payroll management system will also result in cost savings for your business by reducing paper consumption and removing the need for extra staff members to manage this task. So now that we’ve gone over how beneficial having such a solution can be. So let’s take look at what you should expect from one!