How to Implement a Payroll System
Employers are responsible for paying their workers correctly and on time. To simplify the payroll process, the employer needs a payroll system. A payroll system streamlines the payroll aspect of the business. Without one, it is difficult to track and pay employees' time and to adhere to the changing payroll and tax laws set by the government. When implementing a payroll system, the employer must perform several steps.
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Instructions
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Determine the type of payroll system you want to establish. The payroll system you choose should be based on the size of your business and how much payroll responsibility you would like to maintain. The three main payroll systems are manual, computerized in-house and external.
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Use a manual payroll if you are comfortable doing your payroll by hand. If you have only a few employees, this system may work for you. But keep in mind that all wages and taxes are computed manually, which can result in payroll errors.
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Purchase payroll software and hire a payroll staff. Depending on the size of your company, you can hire one payroll person and buy affordable payroll software, such as Quickbooks, or you can hire a full payroll staff and purchase a more expensive in-house computerized system, such as Ultimate Software. Unlike a manual payroll system, a computerized in-house payroll system saves on time and gives you access to an onsite payroll staff.
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Use an external payroll system if you do not want to be bothered with payroll at all. The external payroll system is an increasingly popular method, which includes outsourcing all of your payroll duties, including taxes and benefits administration, to a payroll service. For a small fee, the payroll service handles the entire payroll processing, eliminating the need to pay salaries and benefits to a payroll staff.
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Establish a pay date. Pay frequencies are up to you; however, weekly and biweekly are most common for hourly workers, and biweekly and semi-monthly are most common for salaried workers.
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Decide on a time-keeping method, such as a time clock. According to the Department of Labor, an employer can use whichever time-keeping strategy he chooses as long as it correct and complete.
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Train the payroll staff on the payroll system, if necessary. If you have a more complicated in-house system, such as Ultimate Software, consider hiring specialists to train the payroll staff. Have the payroll department do a mock payroll before running the first payroll. A test run will pinpoint any system glitches. Address issues before the time for doing the actual payroll arrives.
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Ensure your payroll department and your finance department are working together, if applicable. Some payroll personnel are responsible for wage reporting and tax matters. However, some companies have a finance department that handles tax issues and payroll accounting. If so, ensure the two departments are properly streamlined.
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Tips & Warnings
Establish an electronic and/or paper filing system. Keep hard copies of payroll data for at least three years.
References
Resources
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