Payroll Processing Brisbane: The Payroll Process
Payroll processing refers to the procedure of managing the payment of wages by an entity to its workforce or employees. It involves various vital steps needed to ensure that employees are paid each period. To process payroll, bookkeepers also need to track hours worked, deduct money for employee benefits and remit payroll taxes.
Creating a strong payroll processing system will help prevent getting in trouble with the Department of Labor or break labor laws on minimum wage, unpaid overtime, etc. Using a payroll software will not only limit the errors in the computation of the wages and deductions but also make the process go smoothly and quickly. Nevertheless, such software needs someone who is professionally trained at using the software.
Many people think that the payroll process only starts at certain dates of the month. But on the contrary, the actual payroll process starts after an employer hires an employee. Each pay period, an employer needs to calculate the number of hours their employees worked and their pay rate. But before distributing the employees’ paychecks, the employer also needs to deduct money for expenses such as state and federal taxes, superfunds, insurance, etc.
What the employee receives is called net pay. It is an amount left after the gross pay (total hours worked x hourly pay rate) is deducted with tax and benefit deductions. Employees are paid in the form of direct deposit, paper check or payroll card once the net pay is calculated. Most states in Australia require businesses to record the employee payment information on a pay stub.
For many people, payroll processing can be quite difficult, even with the help of a bookkeeping software. But the fact is, this task is quite simple, although it requires a lot of time.
Steps in Payroll Processing
Depending on the way you process the payroll of your employees, the length of time spent doing this task will vary. Some small and medium-sized businesses do this process manually, in the hopes of saving money. However, this method consumes a lot of time. Say if you have around 50 employees, it will take you days to process the payroll of your employees. Manual payroll processing is also prone to a lot of errors, which can get penalised authorities such as the Department of Labor.
Now, other businesses prefer using free software or an online payroll calculator. This is different from “service”, since it uses a platform that manages the payroll operations. One of the great advantages of payroll software is that businesses can automatically compute the net pay of their employees. They are faster and are less likely to commit errors, especially if correctly configured.
Every pay period, there are three common steps that businesses follow in order to process payroll which include calculating the total time worked, computing employee’s net pay and distributing payment to employees:
- Collecting Records of Time Worked
Collecting the records of time your employees have worked is the first step in computing the payroll. Many businesses utilise time sheets, time clock, timekeeping system, or scheduling system in order to record the employee time on paper or electronically.
Manually recording the time worked by your employees will require a lot of time. It means checking each employee’s timecard and determining the total hours they worked over the period of time such as one week, 15 days or one month. Again, if you have at least 30 employees, this could mean spending hours calculating all payroll. So, if you want your employees to receive their pay on time, you may need to start working on the payroll at least 5 days earlier.
Automating your business’ time tracking process would mean being able to compute the total worked time much faster. This means that you can distribute your employee’s pay much sooner, thereby making them happy.
- Calculating Employee Net Pay
Whether you are doing payroll manually or electronically, the method of calculating employee paychecks will be the same. The only difference will be that if you are using a payroll software, you can do this process with a few clients of a button. Manual approach means you’ll have to input the hours worked by an employee into a software and calculating manually.
So, what are the usual processes involved in calculating the employee net pay?
Counting the Hours and Determining Overtime
Well first is you need to count the total hours of work rendered by an employee in the pay cycle. You need to look out for employees who worked over 40 hours per week or who worked more than the agreed daily working hours. Make sure that they are properly recorded. Most payroll systems do this automatically.
Calculating Gross Pay
In this part, you need to multiply the total number of hours for the pay run to the hourly pay rate of the employee. Doing so will make you come up with the gross pay. Again, if you are doing this manually and you have a lot of employees, this task will take a lot of your time. You need to make sure that all working hours rendered by an employee is paid, otherwise, you can end up with unhappy employee. Furthermore, you also need to add variable pay such as bonuses, commission, and other similar payments. Now, if you are using a software, this will be computed automatically with a few presses of a button.
Subtracting Deductions and Calculating Net Pay
Once you are done calculating the gross pay, you also need to find out the exact amount of deductions for each employee. These deductions, as said earlier, include benefits, insurance, and taxes. Deductions are taken out of each employee’s gross pay every pay period. Once the deductions are deducted to the Gross Pay, you get what bookkeepers and accountants call “Net Pay”.
- Distributing Employees Net Pay
Different payment methods can be utilised to pay your employees. You can either choose to pay them in cash or through paper checks. You may also pay your employees through pay card or direct deposit. It is best to check out what payment options are available in your state to ensure that you are not violating any federal or state labor code. After payroll processing, it is vital to write and distribute either paychecks or employee payment information to the bank if you are doing direct deposit. Nonetheless, make sure that your payroll account is funded. The duration of this will depend on whether you are utilising a software or doing the task manually.
Furthermore, while there are no laws that dictate businesses to keep payroll records, it is still vital to keep them. There are several requirements that need the payroll information including employee’s full name, full mailing address, tax withholdings, etc. Most long-running business keep copies of their employee’s payment information after payroll processing just to be on the safe side.