Every company needs to implement a payroll system and its procedures.
The reason is, this system allows your employees to get paid the right amount in a timely manner.
However, the manual and traditional payroll process can take quite a long time so it is inefficient.
This is where the role of the payroll system comes in which allows you to run the payroll process quickly and efficiently through the payroll application.
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By spending less time and effort on payroll, you can focus on other, more pressing business needs.
So, without further ado, let’s look at what an employee payroll system is and what the procedure is in the company.
What is Payroll System?
The payroll system is the process of managing everything related to the process of paying employee wages and filing employment taxes.
For companies, the system is also useful for tracking hours worked, calculating wages, withholding taxes, printing and paying government employment taxes.
Each payment period, you as the employer must calculate and distribute employee wages.
You are responsible for tallying the hours worked by an employee and for accurately calculating each employee’s gross wages.
This system is generally in the form of software that is used to enter nominal wages and working hours.
Then the software uses that information to automatically perform calculations and make withholding taxes, insurance, and more.
Most payroll system software is updated automatically when tax laws change.
You need to do detailed planning of the entire payroll process.
This is because there are always other work related ongoing tasks that require constant attention and monitoring.
For example, changes to withholding taxes, contributions, and other things that need to be considered in the process.
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Payroll System Procedures
In the employee payroll system, the procedure can be divided into three stages, namely pre-payroll, actual payroll, and postpayroll. Check out the following explanation:
1. Pre-payroll
The initial activity at the pre-payroll stage is to determine policies.
At this early stage, it is important to establish company policies such as salary policies, leave and benefits policies, and attendance policies.
Ensure that these policies are well defined and signed off by your company management so that standardized payroll processes can be established.
Next, you need to collect input data.
At this stage, you will have to interact and collaborate with many departments within your company.
That way, other departments can give you more access to important information such as mid-year salary revisions and attendance data.
This data collection process can be very tiring.
However, the payroll system software has integrated features such as leave and attendance management as well as an employee self-service portal to make your work easier.
The next process in the pre-payroll stage is input validation.
In this process, all you need to do is check the validity of the input data whether it complies with company policy or not.
This is the time to ensure that no active employees are overlooked and no non-active employees are included in salary payments.
2. Payroll Calculation Process
At this stage, the first step you need to do is payroll calculations.
This is the stage in the payroll process where input data is entered into the payroll system for processing.
This process results in the resulting net pay after adjusting for taxes and deductions as needed.
Once this process is complete, it’s then up to you to reconcile values and verify accuracy to avoid errors.
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3. Post-payroll
At the time of processing, all statutory wage deductions such as EPF (Employee Provident Fund), income tax deductions and insurance are deducted from the salary.
The frequency of this process may vary depending on the dues. Most of these fees can be done through a special set form.
After all dues are paid, a return report is filed.
Next, it is important for you to record all of his financial transactions for payroll processing.
Salary is one of the most important parts of operational costs to be recorded in the company’s accounting books.
You should always ensure that all payroll and reimbursement data is accurately entered into your company’s accounting or ERP (Enterprise Resource Planning) system.
Next, enter the employee salary payment process. Salaries can be paid by cash, check or bank transfer.
Usually, the company will deposit the salary directly into the employee’s bank account.
After the payroll is processed, the company needs to ensure that the employee’s bank account has sufficient funds to make payroll payments.
The next step is to get a bank statement regarding employee salaries to the company branch.
This statement includes details such as employee id, bank account number, and nominal wages.
So, if you use payroll software that has an employee data portal, it will be easier for you to publish payslips.
In addition, employees can access their accounts and payslips.
4. Reporting
The final step is reporting.
After you complete the payroll for a certain month, the finance department or management team will request a report on the expenses for the employee’s salaries.
Therefore, you need to collect data and extract the necessary information to compile this report.
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Payroll System Scale in Indonesia
In Indonesia itself, there are 3 types or scales of payroll systems that differ in the application of the award and the indicators that are used as a reference.
1. Single Scale Payroll System
The indicator used as a reference in awarding salaries on this scale is the same rank or position. In addition, this system does not pay attention to workload or responsibilities in a job.
2. Dual Scale Payroll System
Slightly different from the single scale, the dual scale payroll system focuses on 3 main indicators. In this case, namely the performance, the achievements achieved, and the workload and responsibilities contained in a job.
3. Mixed Scale Payroll System
This system is a combination of single and multiple scale payroll systems. On a mixed scale, employees with the same rank or position receive the same salary. Plus the allowance component that will be obtained in accordance with the workload carried.
Why Companies Need to Implement a Payroll System?
Payroll is an integral part of the company’s operations.
Not only as a form of responsibility for employee salary compensation, but also plays an important role in ensuring that the company complies with the tax law.
Here are other reasons why payroll systems are so important to companies:
1. Time Efficiency
A payroll system can help you streamline the payroll process.
The process of manually adding figures, entering data, and calculating taxes in the payroll stage can be very time-consuming.
Therefore, with a payroll system, you can save more time on payroll so that your business can run more optimally.
2. Increase Employee Satisfaction
Another reason why companies need to implement a payroll system is because employees naturally want to receive the wages they should receive on time.
If the salary is late in entering the employee’s bank account, of course this can hinder them from fulfilling life’s necessities such as paying bills, and so on.
This certainly can undermine employee trust in the company.
Late and inaccurate payments are likely to cause your employees to question the company’s financial stability.
The difference is only if the company implements a payroll system, then the system will help ensure employees are paid according to the amount in a timely manner.
By consistently paying your company on time will definitely have an impact on your employee morale.
This can affect the environment and culture of your company as a whole, giving rise to positive attitudes and a sense of job satisfaction from employees .
That way, the daily performance of employees becomes more optimal.
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3. Maintaining Company Reputation
In addition to employee salaries, companies must ensure that their payroll activities comply with the country’s tax and labor laws.
Following legislative laws and fulfilling tax obligations efficiently makes a company a stable employer.
This increase in the company’s reputation will ultimately attract and retain a solid talent pool.
4. Facilitate Reporting Activities
Payroll systems also help companies comply with tax and employment laws.
Companies need to report their payroll tax withholding, pay, and employee status to the government quarterly or annually.
Your company’s requirements often depend on the size of your employee’s salary and the type of business you run.
In addition, each country has different labor laws regarding minimum wages, overtime, termination procedures, and more.
Well, the existence of a payroll system makes these rules easier to follow and understand.
Thus the article regarding the payroll system and its procedures that you need to understand.
Each company has different payroll procedures and systems, depending on the needs and interests of each company.