Nobody needs the program without them. Payroll management usually consists of multiple operations – from tracking work hours to managing vacations and bonuses. Doing everything manually can lead to errors, entailing fines for the violation of government regulations. This is the reason why middle-sized and large organizations use payroll management systems. Let’s take a look at the features that an accounting application needs to work correctly.
What payroll management software does
The main function of the software for payroll management is to calculate employee wages. The system determines the total income of a specialist and then deducts tax, pension, insurance, and other contributions from this amount. The resulting sum is transferred to the employee’s bank account.
This primary task is divided into the following secondary ones:
- calculator of wages based on the employment contract;
- calculation of bonuses depending on the work performed;
- tax withholding;
- voluntary contributions;
- vacation pay management;
- sick leave compensation;
- creation of payment instructions (for bank transfers or cash requisition);
- employee registration;
- work time tracking;
- accounting for bonuses, compensations, and benefits.
The Fair Labor Standards Act orders to store data on wages for three years. Payroll-related data (work schedule, work time tracking, etc.) must be stored for two years. If all this information is collected on paper, it will take up a lot of space.
A payroll management system stores this important data in the cloud and hence frees up office space from unnecessary folders with documents. The program automates part of tasks, facilitating the work of accountants, personnel officers, and HR specialists.
Some programs include a self-service feature – an employee can view their rate, bonuses, and other information. If they see incorrect details, they can ask an accountant or HR specialist to change them.
Essential functions for a payroll management system
1. Payment automation
The system automatically processes all payments:
- flexible spending accounts (FSAs);
- health savings accounts (HSAs);
- health reimbursement arrangements (HRAs), etc.
The program notifies accountants when a specialist goes on vacation – there is no need to monitor this via email or Excel.
In addition, companies employ freelance, remote, hourly, or contract workers, and their wages are calculated differently. This can be taken into account thanks to the automation of payroll management.
The automation feature of development saves accountants time, as they don’t have to conduct operations manually. And this affects their performance – the specialists make fewer mistakes and accomplish more tasks.
2. Integration with third-party services
Payroll management cannot function isolated from other applications of the firm. Usually, payroll software companies link the system with:
- enterprise resource planning (ERP) software;
- human resource information systems (HRIS);
- Business Intelligence (BI) tools;
- accounting software.
If an organization requires complex wage calculation, it is important to ensure that all of its applications are interconnected. Thanks to this, employees can instantly share the information they need to make decisions.
For example, accountants don’t have to enter the same data twice – they only need to click ‘Import’ for the current calculation period, and the system will update the ledger. Specialists don’t have to spend hours on routine work, nervously looking for errors and fixing them.
3. Report generation
The system generates reports on important financial information of the company: budgets, taxes, and wages. This makes it easier for large enterprises to exercise control over the complex payroll process and compare with a cash flow, even if these tasks are outsourced.
4. Employee self-service (ESS)
If an employee wants to get information about their wages, they need to ping an accountant and wait for their reply. A self-service function introduced in payroll processing software eliminates the necessity to disturb accounting specialists. Thus, employees can view their payslips, paid vacation days left, and tax forms (Form W-2 or Form 1099-S).
Companies with multiple branch offices and remote employees need the mobile version of ESS. This will enable specialists to log into the system at any time and in any place to view or update information about themselves: address of residence, bank, and so forth.
5. Tax management
This function is crucial for a business because it ensures that the company won’t have problems with a tax agency due to incorrect payroll calculations. Using this management functionality, accountants can:
- create tax forms (W-4, W-2, W-3, 940, etc.);
- deduct mandatory contributions (federal income tax, social tax, insurance tax, etc.);
- file digital tax returns;
- process pay records online.
Payroll processing software monitors tax rates and changes in tax laws in different regions so that they can be taken into account in payroll calculations.
Benefits of a payroll system
Enterprises incorporate payroll processing software because it helps to:
1. Pay wages accurately
Employees get frustrated when their employer delays wages, makes mistakes in the amount, or forgets about bonuses. If all this happens regularly, workers leave for firms with greater financial stability.
2. Maintain a good reputation
Accountants calculate wages in accordance with labor and tax laws. Violation of the rules lowers the image of the company not only in the eyes of its employees. This makes it more difficult to hire new specialists.
3. Prepare mandatory reports
Businesses must report taxes, payments, and employee statuses to authorities quarterly or annually. With payroll processing software, collecting data for reports becomes easier.
4. Comply with labor laws
Each state or country has its labor laws where a minimum wage, overtime work rates, hiring and dismissal procedures, etc. are provided. Obeying such rules is easier with the systems.
The features described in this article cover the tasks of most businesses. Some organizations require complex wage calculation, so payroll processing software available on the market may lack the functionality they need. That’s why businesses tap into payroll software development outsourcing.
Do you need a unique solution for payroll management? Andersen’s team will turn your ideas into a convenient-to-use accounting system. Our specialists have 16 years of development experience and more than 1,000 projects delivered for various industries – from tourism to healthcare. Leave a request on our website, and we will assemble a team for you within two weeks.
Also read: 4 Things are Essential for A Successful Service Business