What is Payroll, actually? and How can it affect a business? | PATC

In any company, payroll will be the total sum of all of the financial records of salaries for an employee, any wages, bonuses that may be given to the employee and of course

any deductions that may be taken from the employee?s salary. But in accounting terms payrollis slightly different. In accounting terms payroll means the amount that is

Payslip Example 2012 in South Africa

paid to employees for any services that they have provided during a certain period of time. This could be a month, a week or a day etc.

How does payroll affect a company?

Payroll plays a very important role in any company, no matter what the size of the company. In any company payroll affects the net income by way of taxes paid and payroll is also subject to certain laws in the country. Speak to your professional accountant to find out what laws there are.

But business revolves around its most important asset ? its staff. Payroll can enormously affect the morale and productivity of a business, as all employees can feel either very negative or positive in response to possible payroll errors or irregularities. To create a good company morale with the employees it is vital that the company Payroll Department pays the employees accurately and timeously. This doesn?t matter how small or large a company is. Part of this exercise for the Payroll Department is also to make sure that the correct deductions are taken from the employees salary but they these deductions are also remitted in a timely manner too. This would include any salary payments, tax withholdings and any other deductions that may come from a paycheck.

Frequency

Most companies pay their employees at regular intervals, so that the regular income stream will help to benefit the employee in the form of their own monthly financial management plans. However, the intervals of payment may vary from company to company, industry to industry or even from the seniority of the employee concerned. The most common payroll frequencies are: daily, weekly, monthly, semi-monthly and some companies pay their employees very quarter.

Outsourcing

Payroll can often be a time consuming activity for companies, so to get around this they often outsource their payroll activities to a specialist payroll company or even their professional accountant.

Picture of a possible Payroll department

This can often lead to a reduction in the cost of a company managing their own payroll. Why is this though? Simply put, you can save on the cost of a fully trained payroll employee, and software that might be needed to process the payroll. Often taxes may need to be filed consistently and accurately to different regulatory agencies ? depending on the companies industry. This may add to the complication of the payroll department. An example of this could be the difficulties a payroll? department may have in working out the sales employees salaries when they are paid via a commission structure.

With the changing tax laws it is also often difficult for companies payroll departments to continually monitor these changes and make the necessary changes timeously. Hence another reason to outsource the payroll needs of a company.

Conclusion

Payroll means the sum of all the financial records of salaries for an employee. Payroll can affect morale of a company drastically if it is not done so in a timeous and accurate manner. This could lead to possible employees working inefficiently too. It is for this main reason and due to complicated payroll processes that many companies decide to outsource their payroll needs to their professional accountants or a payroll management company.

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