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Payroll refers to the process of compensating people in the organization for their work. Every organization needs to run a payroll. An employer is duty-bound to accurately calculate the compensation owed to the employee after having factored in the deductions that need to be made. The organization must then disburse the net compensation to the employees on payday.
The payroll process involves performing repetitive and time-consuming tasks. As the organization grows and the headcount increases – the complexity of the payroll process increases and can even become overwhelming. However, payroll is an essential function that every employer must perform diligently.
Payroll Management System
A payroll management system enables organizations to run payrolls efficiently. Automating the payroll process frees up time and effort – enabling employees to focus on core business activities. Payroll software eliminates errors, eliminates delayed payments/penalties, automates compliance, is convenient to use and easy to scale, and reduces overheads.
An efficient employee payroll management system by Akrivia will benefit every organization. Designing the payroll process requires careful thought – the mere installation of employee payroll software or instituting random changes does not help.
Optimizing the payroll process for maximum efficiency requires taking an overall view of the process and the technology that is used. Although every business is unique – with unique needs, there are certain steps in optimizing the payroll process that are applicable across organizations.
5 Ways to Optimize Payroll Process
Frame Clear and Simple Payroll Policies.
Usually, payroll errors occur due to a poor understanding of the company’s payroll system. Poor understanding can be due to improper policy communication or a lack of training on payroll policies. Easy-to-understand and simple payroll policies eliminate errors in payroll, compliance, penalties, employee misclassifications, etc.
Payroll policies should necessarily address and include:
- An overview of the organization’s payroll process
- Employee classification criteria (full-time, part-time, contractual)
- Reporting requirements of employees
- Procedure for setting and calculating salaries
- Criteria for promotions and benefits calculation
- Procedures for responding to payroll errors
Once the payroll policies have been framed, they must be transparently communicated and explained to all the employees.
Continual communication and training on the payroll policies are critical – especially for payroll and HR personnel. Payroll management is not static – it is constantly evolving through changes in regulations, technology, technological tools, and payroll services. Payroll personnel need to keep themselves updated with the changes as they occur.
Institute a Payroll Schedule.
A payroll schedule lays down the periodicity for paying employees. However, when organizations have part-time and contractual workers in addition to full-time workers, they sometimes follow multiple pay periods. For an optimized payroll process, it is best to minimize pay cycles to simplify payroll processing, prevent duplication of processes, and reduce the risk of errors.
Once the payroll schedule is issued, you must strictly adhere to the committed schedule. The payroll schedule should also be communicated to payroll personnel and all the employees. The payroll schedule can be fed into the Akrivia payroll software, and you need never worry again about slipping on the payroll.
Have an In-depth Understanding of Tax Requirements.
Gaining a complete understanding of the state and central tax laws related to your business’s payroll is essential. Wrong calculation of tax liabilities in the payroll will attract penalties from the tax authorities and related government agencies.
It is important to stay updated with any changes in the state/central tax policies and consistently meet all government deadlines for tax filing and reporting. As a best practice, it is beneficial to delegate the responsibility of tracking tax laws and updating the organization’s payroll processes periodically to a specific employee.
The management and HR/payroll personnel should have a thorough understanding of the organization’s tax obligations – especially those related to:
- Payroll deductions
- Pension contributions
- Salary hikes and bonuses
- Employee insurance
Invest in Payroll Software.
The way a business chooses to run payroll is a major determinant of the cause of errors. The risk of errors in payroll increases if your organization runs payroll with manual processes or uses outdated payroll software. Modernized payroll management software, such as the one from Akrivia, will automate the entire payroll and compliance function. Contemporary payroll processing software integrates time and attendance, affects direct payments, and takes care of tax compliance.
Investing in a modern payroll system pays for itself through savings in administrative time and effort for the payroll processes. The best payroll software helps in the accrual of savings through the elimination of rework owing to inevitable errors in manual payroll. Modern payroll systems also provide online access to all employees to view their salary slips, the record of hours worked, leave utilized/balance, sick leave, expense claims, etc.
Perform Regular Audits.
Periodically performing detailed audits helps identify errors and implement corrective measures. Detailed audits involve a thorough analysis of the process workflow for payroll to evaluate process strengths and weaknesses. The audit should necessarily include:
- Analysis of the payroll processes
- Evaluation of the payroll software to assess the efficacy of the integrations and currency of the updates
- Adequacy of training
In the case of small businesses, the cost savings of outsourcing payroll could outweigh the investment. A payroll system for small businesses could sometimes be financially unviable if the businesses are in their early growth phase. Such businesses might not be able to invest in a new payroll system or update an outdated one. For such businesses, outsourcing the payroll function to a specialist, the payroll service provider, can be a strategic and cost-effective choice.
Even for larger and mature businesses, outsourcing is often an attractive option. Many large businesses are increasingly outsourcing the payroll function to a full-service provider, freeing up their employees to focus on the business’s core value-adding functions.
We can help!
The payroll management software by Akrivia takes end-to-end care of payroll. The cloud-based payroll software is powered with an intuitive UI. It enables easy management of salary structures and provides seamless and error-free integration of time and attendance data. The HR and payroll software allows you to create a system of flexible benefit plans for employees to choose from, generate statutory receipts (PT, ESI, etc.), manage tax declarations/deductions, and generate payslips/tax-deduction reports. The software supports role-based access, incorporates provisions for the highest levels of data security, and processes full & final settlements.