Payroll System Essay

What is Payroll? The term ‘payroll’ encompasses every employee of a company who receives a regular wage or other compensation. Some employees may be paid a steady salary while others are paid for hours worked or the number of items produced. All of these different payment methods are calculated by a payroll specialist and the appropriate paychecks are issued. Companies often use objective measuring tools such as timecards or timesheets completed by supervisors to determine the total amount of payroll due each pay period.After a payroll accountant multiplies an employee’s hours by his or her pay rate, the gross income amount is entered into a calculator or computer program. Regular deductions such as tax withholdings, FICA payments (social security), medical insurance, union dues, charitable contributions and so on are then categorized and subtracted. The remaining balance is then converted to a check and becomes the employee’s net pay for that time period.

Payroll departments also identify the employer and employees by a federal code and keep a running tally on total income and deductions for the fiscal year.For small business owners, keeping enough cash in a payroll account is often one of their highest priorities. Even if the business itself hasn’t become profitable, employees must still be compensated for their services. This is why many smaller companies prefer to keep their payroll obligations as low as possible until they’ve reached a certain level of profitability.

It’s not unusual for small business owners to forego their own salaries in order to meet their payroll obligations. Setting up an effective payroll system is not especially difficult for trained accountants, but it can be very time consuming.Some smaller businesses rely on user-friendly computer software to set up a simple payroll system complete with check printers and file storage. Larger companies may assign trained accountants to handle payroll issues as part of their overall duties. But many businesses without the means to maintain their own payroll systems choose to farm out this task to outside specialists. [pic][pic]Since payroll records are based on objective criteria such as timecards and federal tax forms, outside accountants can perform all of the calculations, store all of the year-to-date data and issue paychecks in a timely fashion.

Employers simply need to update these payroll companies with changes in employee pay rates or deductions. What is Outsourcing? Outsourcing refers to a company that contracts with another company to provide services that might otherwise be performed by in-house employees. Many large companies now outsource jobs such as call center services, e-mail services, and payroll. These jobs are handled by separate companies that specialize in each service, and are often located overseas. There are many reasons that companies outsource various jobs, but the most prominent advantage seems to be the fact that it often saves money.Many of the companies that provide outsourcing services are able to do the work for considerably less money, as they don’t have to provide benefits to their workers and have fewer overhead expenses to worry about. What is Payroll Reports? Payroll reports are documents that are generated from accounting records that have to do with the payroll of a business or company.

The reports are normally structured to account for all payroll transactions for a specified period of time. A payroll report may cover a single pay period, or include data relevant to longer periods, such as a quarterly or annual payroll.There are several key components that are part of basic payroll reports. The wages and salaries of employees working with the company during the cited period form the basis for the report. Along with carrying gross figures for salary and wages, payroll reports also identify the net amount of pay extended to the employee. Along with salary or wages, payroll reports also break down any and all types of withholding activity.

Withholdings will include detail on the amount of taxes retained by the employer for forwarding to local and national tax agencies.In the event that there is some type of national financial security program, such as the Social Security program of the United States, employers also withhold a calculated amount and forward the funds to the appropriate agency. Payroll reports also reflect other types of withholding as well. Examples of these other forms of withholding would include voluntary contributions to retirement programs, payroll deductions associated with garnishments, or premiums withheld to pay for all or a portion of healthcare insurance provided through the employer.

The total amount of withholdings and the net income issued to the employee will equal the gross income listed for the period cited. While a great deal of the detail on payroll reports focuses on how wages and salaries are distributed, a typical report will also include information on taxes paid by the employer. In many countries, employers are responsible for paying taxes in addition to those withheld from an employee’s pay. Comprehensive payroll reports include information about both the cumulative total of employer taxes paid during the period as well as a breakdown of the tax burden to a specific amount per employee. pic][pic]While payroll reports were once generated manually, many companies now make use of software that quickly analyzes all appropriate data and organizes the information into useful formats. Most financial software provides templates that can be used to generate payroll reports.

Some of the more popular accounting software packages also make it possible to build a payroll report format manually or revise an existing template. This option allows payroll reports to be generated that are focused on specific types of information or provides an overall picture of the payroll process.