Payroll is the process by which employers remunerate their employees. Payroll involves the deduction of income taxes, national insurance contributions and other statutory payments from an employee’s wage, and the payment of employer tax, state pension contributions, child benefit and other deductions to government agencies.
While payroll is a common fixture that employers and employees deal with every pay day, not everyone is well-versed about it and its other specifics. Should you wish to brush up your knowledge about payroll take your cue from these FAQs.
Does every company need a payroll service?
A: Every business has an obligation to pay its employees. This can prove difficult for small businesses with limited resources who are not equipped to meet compliance criteria.
What are the benefits of using a payroll service provider?
A: There are many reasons for outsourcing payroll services, including reducing risks regarding non-compliance with labour laws, control over productivity, time management and motivation.
Outsourcing also frees up internal resources resulting in an improved customer experience. Making use of a payroll service provider ensures that your business provides a fair and just pay for all employees.
Who are the main stakeholders in payroll?
A: The main players are the employer, employees and government agencies. Employees are entitled to receive their full wage minus statutory deductions. Employers, in addition to paying their employer tax must also ensure that employees receive payment for all their hours worked (and sometimes even pay for time spent on things like training) plus any contractual benefits or allowances.
Government agencies collect taxes and other statutory payments from both the employer and the employee, while also ensuring that employers comply with employment legislation.
What is a “payroll solution”?
A: A payroll solution is software which automates this whole process by handling all aspects of an employer’s payroll, managing pay rates, deductions, statutory payments, statutory rights, real-time payroll calculations and filings.
Payroll software products are targeted at large organisations while others are aimed at small businesses.
How do I choose the best payroll solution for my business?
A: The “best” product for you will depend on your particular circumstances. It’s important to identify your needs as this will determine which features you’ll need and how complex or expensive the software will be to install, run and maintain.
- How many employees do you have?
- Do they receive any bonuses or commissions?
- Do they work different types of hours (full time, part time, shift work)?
- Do you offer pension schemes or other benefits?
- What do you want to be able to report on and when?
Payroll software should meet your company’s needs, thus purchase one with the valuable features, and easy installation and maintenance.
What is the purpose of a payslip?
A: A payslip, sometimes referred to as a ‘statement of earnings’, is an important document in any business. It details how much has been earned by an individual employee and breaks this down into the various required deductions and taxes.
How do employers calculate an employee’s pay?
A: An employer calculates the pay of an individual worker by first calculating the gross amount, this is then reduced by any relevant deductions such as income tax and national insurance contributions. The final figure represents the net earnings of the worker.
What is the difference between gross and net pay?
A: Gross pay is an individual’s total pay, including any bonuses or other additions. Net pay is the individual’s take-home pay, which reflects the amount they will be paid after all deductions have been taken off.
How often should a company issue payslips?
A: Many companies issue payslips on a monthly basis, however it is important for an employer to identify the optimum time frame according to their payroll cycle.
What are some of the common business expenses?
A: Some examples of common business expenses include rent, utilities and office supplies. Businesses should also be mindful that employees expect to receive payment for any work expenses they have incurred.
For example, a sales representative may need to make a number of calls from their mobile phone and expect reimbursement for this.