Managing payroll is indeed a challenging job. On paper, it may seem easy, however, in reality, it certainly isn’t. You have to be careful of legal requirements, for example, taxes, etc. On the other hand, you must give the salary according to your employees’ hours and subtract the taxes and other amounts, etc. This is why top organizations hire HR personnel for this purpose. Furthermore, they also use payroll software solutions to facilitate them.

On this note, let’s take a look at different payroll systems used by top companies:

Types of Payroll Systems

There are three different types of payroll systems:

1.       Manual:

In this system, a payroll person processes the entire payroll by hand. This system increases the chances of errors and mistakes. Therefore, this type of system is only better for small businesses and companies with only a few employees. However, the plus point about this system is it is inexpensive.

What is essential for this job, though, is that the payroll person must grasp payroll laws. Otherwise, too large a payroll can result in inaccurate tax processing.

2.       Outsource:

Another cost-effective and time-saving method is to hire an external payroll service provider or sign a contract with a payroll system agency. They work professionally and complete the payroll responsibilities of your company.

These service agencies give complete assurance of total accuracy and ensure that there won’t be late payments issues. However, the con of outsourcing is that employees might not have immediate help if they have payroll concerns.

Moreover, when a payroll service makes tax errors, the IRS penalizes the employer and not the payroll service provider.

3.       Computerized System:

If an employer wants to eliminate manual payroll processing, then a computerized system is a good alternative.

Computerized payroll systems make work more straightforward and more effortless. This method minimizes potential mistakes and saves time.

Types of Computerized Systems:

There are many types of automatic payroll systems. However, they all come under two main categories:

Payroll software:

You download payroll software on your PC. Now, there are dedicated payroll software for accountantsavailable for small, mid, and large-scale organizations. A payroll application will tie your payroll management to a single computer.

However, the functionality may be limited. For example, the app may carry out the calculations for you, but it will not produce payslips. Therefore, you have to work manually on your own.

Small businesses and companies with very few employees can download free payroll software too. Although the app might have its limitations, it will be able to perform basic tasks like working out the tax and National insurance for the employees.

Types of Payroll Software:

The usage of a payroll application is to manage, organize and automate the payment of an employee.

There are two types of payroll software:

• Integrated Payroll Management: This type of management covers essential tasks like payroll processing, tax calculations, and payment check printing.
• Dedicated Payroll Management: These apps are standalone. Their features go beyond core features. Apart from time tracking, attendance, benefits administration, it includes even a tax planner.

Cloud or Online Systems:

You access online payroll software through a web browser using the internet. This system stores your data remotely. Therefore, you can access it from different locations without any difficulty. You only have to have a secure login. Most of the online systems automate the entire payroll process.

They can take care of the tasks like:

• Tax calculations
• Producing payslips
• National Insurance and pension deductions
• Keeping up with legislation
• Generating year-end tax returns

Some advanced payroll software programs also offer additional functions, such as help with recruiting and onboarding. Furthermore, they assist with admin and management tasks as well. Netchex is an example of such a payroll program. It is categorized among the best payroll software in 2021. 

The Takeaway

Whatever system you choose should be according to your business. Do not choose a system for small businesses if you have a large corporation. Before deciding, make sure you have done thorough research regarding all the systems. Hire an expert for advice if you are unable to decide for yourself.