A Step-by-Step Guide for Payroll Management

Managing payroll is an essential part of running a business, and you need to have the right tools and systems in place to ensure everything runs smoothly.

It is also key to ensuring a positive employee experience from start to finish. After all, payroll is one of the most important business processes that directly affects all employees.

With the right payroll system you can ensure this:

• Your employees are paid on time and the amount they receive is always correct
• Your onboarding process will be smooth and easy for both you and your employees
• They withhold the correct amount of taxes and comply with local and national labor laws
• You remit taxes and deductions on time
• Your payslips are stored securely and reliably

Of course, payroll is only one piece of the puzzle when it comes to managing a business. So you need to ensure that your payroll system is well integrated with your other processes and that your employees always come first.

In this article, we'll define what payroll is, explain why it's important for every business, and give you a step-by-step guide to successfully managing your payroll.

What is Payroll?

Payroll is the administrative process of paying payroll to your employees (salaries, wages and bonuses) as well as managing payroll deductions made in accordance with your company's policies, local laws and best practices . Managing your employees’ taxes, insurance and pension contributions is also an essential part of payroll.

Managing payroll manually can be very resource intensive and carries a high risk of errors. That's why most companies today are moving to automated payroll systems, most commonly cloud payroll software.

To successfully manage your payroll, you need to consider a number of factors:

• Experiences and satisfaction of your employees with your payroll process
• Your company's policies for employee pay, time tracking, vacation, and benefits
• Storage and management of input data
• Deductions, taxes and compliance with local and national labor laws

However, that's not all there is to payroll. You also need to ensure that your payroll is well integrated with your other business processes and that it provides a positive experience for employees.

Payroll outsourcing has also been a popular option in the past. However, when you compare payroll outsourcing, in-house payroll, and a hybrid model, you'll quickly realize that having a third party manage payroll entirely is the least advantageous option (and also the most unsafe Type of payroll accounting).

This is where a unified workspace platform can help: it gives you a 360-degree view of all your administrative processes and allows you to manage them effectively. Plus, you put your employees at the center of your business by giving them a single system where they can access everything related to payroll and their work in general.

Why is managing payroll so important?

For any business that employs employees, having payroll under control is crucial. There are a few key reasons why managing payroll is so important:

• It's a legal requirement: Failing to have an efficient payroll process in place can result in your non-compliance with local and national labor and tax laws and risk expensive penalties or wage claims. To stay compliant, you need to manage your payroll well and have the right system in place.
• This is essential to the health of your business: efficient payroll helps your employees feel comfortable, which in turn increases productivity. According to a Gallup survey, employee engagement is directly linked to better business outcomes, such as lower employee turnover and higher profitability.

As you can see, managing payroll is essential for any business that employs employees. In the next section, we'll give you a step-by-step guide to managing your payroll effectively.

How to create a comprehensive payroll strategy

Now let’s look at how you can develop a comprehensive payroll strategy that will pay off for you in the long run.

Put your employees at the center

Your employees are the driving force of your business, and payroll should be about them, not you. Payroll systems need to be employee oriented and not administrative staff oriented, but from our experience we can say that this is rarely the case.

Get the right tools

Look for a payroll platform tailored to employee needs, or better yet, an app that can handle all of your business processes, including payroll, HR, and employee accounts. This allows you to streamline all processes and make them more efficient and clearer for your employees.

Set up a process for payroll

In the previous section, we gave an example of a payroll management process. The specific details may vary depending on your location, but in general the billing processes look similar. The right software tools are a great help and save you hours of manual work.

Make sure you always comply with regulations

Of course, compliance is crucial for every business. In the age of telecommuting and hybrid working models, this can pose a number of specific challenges, such as: B. processing payroll for employees working in other countries and paying contractors.

Additionally, you need to make sure you stay up to date with any new legal requirements or changes to deductions and taxes, such as:  the increase in social security contributions in the United Kingdom.

Step-by-step instructions for making payroll

It is important for your company's financial well-being that payroll is processed accurately for each employee. In this section we will go over the different steps of payroll.

1. Define your wage and salary policy

Your payroll policies include details about compensation, attendance and time off work, employee benefits, and more. They need to be set early and approved by your management team.

2. Training new employees

The first step in payroll accounting is training new employees. When you use payroll software, this means creating a new profile for each employee and capturing all input data according to local data collection requirements. Depending on the country, this data typically includes the following:

• Name and address
• Job title
• Social Security Number
• Bank account details

3. Collect input data

The type of input data you need to collect depends on the country you come from, but it typically includes details such as:

• Monthly/annual salary or hourly wage
• Number of hours/days worked per week
• Free time (and the type of vacation)
• Overtime
• Bonuses
• Claimed allowances and reimbursements
• Steer
• Voluntary and mandatory deductions and more.

If you use software that manages all HR and payroll processes, much of this information is captured automatically.

4. Double check the employee details entered

Double-check the data to make sure it matches your pay policy. Make sure all employees are on your payroll and that any terminated employees are no longer in the system.

5. Calculate gross and net wages

Next, you need to calculate the employees' gross wages as well as the deductions and taxes due to determine the net wage. If you do this manually, this is probably the most time-consuming part of the process - and it's error prone. That's why we recommend using a comprehensive, unified work platform that allows you to manage payroll efficiently - or at least a payroll app.

6. Pay employee salaries

You need to make sure you have enough money in your company's bank account to make salary payments and then arrange them. If you use a payroll system that is connected to your bank account, this can also be automated (but you still need to make sure you have enough funds). With IceHrm you can make mass payments to all employees in seconds.

7. Transfer of deductions and taxes

Next, you need to transfer all taxes and voluntary and mandatory deductions to the tax authorities. Also pay attention to due dates: you can set reminders for all due dates and ensure that you allow enough time to process all payments.

8. Distribute pay stubs and tax returns

The final step in payroll processing is distributing payslips and tax returns to your employees. If your payroll system has a self-service portal, your employees can access all relevant information there and also download their payslips.

These steps may vary by location, but the overarching payroll principles are similar across countries.

Why using the right payroll software is so important

Payroll is one of the most complex processes in existence, and the consequences of doing it incorrectly can be disastrous for your business. Additionally, the way you manage your payroll has a direct impact on employee satisfaction and engagement: Employees expect a consumer-like experience from their employers and the software they use at work - and the payroll system you use is an important part of it.

For best results, use a system tailored to your employees that allows you to manage all administrative processes in one place. A unified workspace platform with payroll, HRIS, app access and device management will help you do this.

Navigate the complexities of payroll effortlessly. Choose the right tools, follow best practices, and prioritize employee satisfaction. IceHrm is your partner in success!