Payroll System Benefits

Every employee needs to be paid for the services he provides. For this to happen, the employer must have a payroll system in place. Without it, chaos occurs, as employees will become upset if their checks are inaccurate (or worse, if they don't get paid) due to a haphazard payroll structure. So obviously, there are benefits to be derived from using a payroll system.

The Defintion

A payroll system is the method used by payroll professionals to pay employees for their services. Regardless of the type of system used, there are basic functions that must be performed--calculation of hours worked, deductions (401k, health, garnishment), and benefits (auto allowance, vacation, personal time).

Manual

A manual payroll system is typically used by small organizations. The primary benefit is that it's very inexpensive to set up and maintain. Businesses using this system do not have to invest in a software or spend money on training classes for the payroll processors. They can also establish their own payroll system instead of adhering to the rules of payroll software. They can log and maintain employee hours and tax records, according to how they see fit.

Computerized

A computerized payroll system saves on time and lowers your error ratio. You can enter payroll payment information quicker than with a manual system, and run payroll registers to double-check your information before printing the checks. This allows you to detect errors and adjust them beforehand. Additionally, computerized payrolls simplify tax processing (941s and W-2s) by computing the data for you and allowing you to do bulk print runs.

External

Many companies use an external payroll service, such as Paychex and ADP, to process their payroll for them. This eliminates the stress of processing it yourself. Outside services also offer direct deposit services, where employees' paychecks are electronically transported into their bank accounts. Additionally, companies using them do not have to invest money in an in-house payroll software. They do not have to spend the money on in-house processors.

Choice

When choosing a payroll system for your company, select the one that benefits you most. Companies with fewer than 10 employees (especially if the hours or salaries tends to remain the same each pay period) generally benefit more from a manual system. For companies with 10 to 50 employees, purchasing a software package is advisable, as long the software is relatively simple to use. A large firm with 50 employees or more should go with an external payroll service.

Structure

Once you've chosen the payroll system that works best for your company, you'll want to ensure that your payroll structure is organized and efficient. For manual payrolls, keep copies of all payroll information (copies of checks and types of payments made, including taxes). For computerized and external payroll systems, create various spreadsheets to document each payroll. Do not depend on the software only to maintain your payroll records, as they can malfunction, resulting in the loss of crucial payroll data.