Information About Payroll Systems

Establish a payroll system that ensures payroll compliance.

A payroll system is the channel through which the employer processes its payroll. Specifically, if the employer doesn't have a payroll system, it cannot perform payroll processing. The latter includes ensuring compliance with wage, payroll tax and record-keeping laws.

Types

The employer can use one of three payroll systems: manual, in-house computerized or external. The manual system requires processing the payroll completely by hand. The in-house computerized system requires using payroll software for payroll processing. The external system requires the employer to outsource its payroll duties to a payroll service provider.

Function

Manual payroll processing includes manually computing time cards, wages and salaries. The payroll representative also manually figures deductions, such as payroll taxes and company benefits. The in-house computerized system uses software, such as QuickBooks and PenSoft, to process the payroll. The software also stores payroll data. The external system has payroll professionals who handle paycheck processing, and in many cases, payroll tax and benefits administration, for their clients.

Considerations

The employer should not use the manual system if it has many employees because the likelihood of errors is high with this system. It should outsource the payroll or use payroll software in these cases. Additionally, the manual system doesn't enable direct deposit. Ultimately, the payroll system should match the employer's needs.

References

• Media Wiley: Creating a Payroll System
• HR World: 10 Reasons to Outsource Payroll

Resources

• Premium Payroll Solutions
• Payroll Service Providers