Payroll Management

One of the most crucial aspects of a successful business involves payroll management. Regardless of whether a company employs one person or 500, all departments need to function with an understanding of how their decisions affect all other departments.


1. American Payroll Association

The membership of the American Payroll Association consists of individuals engaged in any aspect of payroll management and from various fields related to payroll management. These members come from all 50 states and Canada. In a field as vast and necessary as payroll services has become, this organization of individuals grew from a common need to gain from other's experiences and to have reliable payroll knowledge to guide them.

The American Payroll Association sets standards of expertise and understanding that cover every aspect of payroll processing. They are a reliable source of tax forms plus the guides and pamphlets on filling them out. These forms cover not only federal tax issues, but also state, county, and even local tax issues such as school districts.

The American Payroll Association provides courses and conferences on all aspects of personnel management from the pros and cons of various methods of keeping track of time worked, both manually and electronically; the implications of fringe benefits such as health plans, sick pay, and vacation pay; workmen's compensation insurance, and retirement plans, to income tax compliance on payroll tax laws and regulations on federal, state, and local levels. Wherever a need exists or arises pertaining to payroll services, the Association aims at solving it.

The American Payroll Association provides credentials certifying that an individual has a certain level of knowledge, plus the abilities and skills for working in the payroll profession. The two levels of certification offered are: Fundamental Payroll Certification (FPC) and Certified Payroll Professional (CPP). These certifications reflect that individuals have payroll expertise, help them secure promotions in the payroll management profession, advance their career, plus enhance their overall standing in the payroll processing profession.

2. Payroll Services Time Management

Time becomes the most precious commodity a business owner or manager has - whether of a very small business, mid-size operation, or huge corporation with hundreds of employees. One of the most time-consuming payroll management processes is keeping the employees paid on time, and accurately! Nothing destroys employee morale quicker than a pay check arriving late - even by two or three hours. When the pay check fails to reflect 15 minutes of overtime, fear can set into employees, and they are reluctant to work overtime in the future. Rumors can fly quickly throughout the company.

Managing the time involved in handling all the various payroll aspects becomes a major challenge for most businesses. Often, the amount of time involved by payroll management requires a full time department. Even when the actual printing of the payroll checks and filing the government payroll reports are outsourced to a payroll services company, the employing company has to calculate the hours worked by each employee.

A wide variety of circumstances need to be considered by the payroll processing department. A company might have some employees who are paid by the hour, some by-weekly, and some monthly. Some employees might be part time and some full time. The full-time employees might be eligible to receive overtime. Some employees will receive straight salaries regardless of the number of hours they work, while others receive a straight salary plus "perks" for working overtime. These perks might include extra vacation pay, special tickets to the theater, or free lunches in the company cafeteria.

Hourly personnel and some salaried personnel usually keep daily time sheets. This can be done manually on paper, or on punched time clocks. Electronic time clocks that automatically track when an employee arrives and leaves can now be linked directly to the payroll software. The American Payroll Association provides many solutions to producing accurate time sheets. Payroll tax laws and regulations require certain time records be kept for certain periods of time for the protection of the personnel.

3. Payroll Services

Owners of a business need to keep their focus on the whole operation of the business and not get mired down in the details of time-sheet errors, changes in payroll software, and updates to payroll tax laws and regulations on both local and national levels. By outsourcing the majority of the payroll processing to a payroll service, business owners can reduce the amount of time spent producing payroll information, preparing payroll journals and registers, and troubleshooting payroll software.

Selecting a payroll service requires thorough checking of the payroll specialist's credentials and reliability. Their membership in the American Payroll Association is a plus. Ideally, their principal owners have earned Certification by the Association. You can check with the Association to see if any complaints have been lodged against the company. Talking with existing clients can also reveal important information. The main questions that good payroll management needs answered pertain to reliability of delivering pay checks on time and the accuracy of the pay checks. Find out which payroll software the payroll service uses, and obtain sample copies of all the data printouts that you will receive. You need these reports to be transferred electronically to your in-house accounting or payroll software. The reports need to be compatible with your regular accounting software.

Outsourcing the payroll, regardless of whether you have one employee, a hundred employees, or 500 employees, usually is in a business' best interest.

4. Payroll Tax Laws and Regulations

Of the hundreds of details and decisions that go into forming a payroll processing system, a good percent are the result of payroll tax laws and regulations. Each state has developed its own payroll tax laws. The chief occupations in the states, plus the influence of weather on occupations, the age of the residents, and the financial needs of the state create the differences between the states' laws. Payroll tax laws and regulations also come from the county level and from school districts. Payroll software has made it much easier for business personnel and payroll services to track this detailed information.

An individual's estimated portion of the taxes is deducted from the pay check by law. At the end of the year on their personal income tax return, the employee balances what was withheld and what the actual tax is. Payroll departments or payroll services file reports and send the amounts withheld to the government as required.

Payroll management also includes handling situations where an employee's pay check is legally garnished by the government to pay a legal obligation such as child support. The payroll software needs to track this, both deducting it from the employee's earnings and remitting it to the government office on time.

Good personnel and payroll services aim at tax penalty prevention by making sure all aspects are in compliance with federal and state payroll tax laws and regulations. This can be quite a challenge, especially for companies who have employees who work in more than one state. The payroll software needs to track both the time worked in each state and the amounts earned in each state. The actual resident state of the employee also needs to be considered for payroll processing.

5. Personnel Department

A prospective employee usually makes the first contact with a company through the Personnel Department, often called the Human Resources Department. A good payroll management system requires obtaining certain information from the employee. This information, required by various payroll tax laws and regulations, includes social security number, full address, and emergency contacts.

An I-9 form, Employment Eligibility Verification, must be filled out and retained by the employer for three years. The form documents that the new employee is authorized to work in the United States. Various copies of proof of citizenship or right to work, such as birth certificates and drivers license are required with the form. A copy is not sent to the Immigration Department.

The personnel department also has the employee fill out a W-4 or a W-9 form, showing the number of income tax dependents, so the payroll processing department or payroll services will know how much tax to deduct from each pay check.

Other payroll deductions determined by the personnel department might include retirement funds, savings accounts, vacation funds, and medical and/or dental insurance premiums. Once deducted, the payroll software needs to transmit these funds to the appropriate departments.

6. Payroll Processing

The payroll processing requires a reliable timetable to ensure that the pay checks are prepared and signed on time. The first step of the payroll management work flow pertains to receiving information about what to pay. Payroll personnel need to receive time sheet information from each employee. Once verified and totaled, the information can be entered into the payroll software. Most payroll errors or disagreements come back to a misunderstanding obtained from the original time sheet. Adequate time for making sure the information is correct will save much time later.

The payroll software needs to be programmed to either add or deduct many items, such as vacation pay, sick pay, medical insurance premiums, and especially overtime. Once the software has the hours worked, along with all other information that pertains to the employees in it, the payroll personnel can print, sign, and distribute the pay checks.

7. Fringe Benefits

Good payroll management requires researching and making decisions on a multitude of fringe benefits. These fringe benefits often entice a person to either work for a company or to stay employed by it.
Most companies offer medical insurance in some form. The company might pay for the entire premium or only a portion of the premium. Having insurance available under group plans usually means lower premiums than individual plans, so even though the company doesn't pay the total premium, an employee benefits.

Whether or not the company pays for sick time, and whether the vacation pay package starts right away or only three years from now, affects whether an employee starts or stays with a company. The payroll management plans of some companies now include child care and/or day care provisions. Fringe benefits need to fulfill the immediate needs of an employee, and the variety of benefits possible remains limited only by the creativity of the payroll personnel.

8. Payroll Accounting

A payroll accounting system needs to reflect hundreds of types of information. From the original name, address, and social security number to payroll deduction information, the payroll accounting system needs to accurately track all the information in a manner that allows payroll management personnel to make major decisions that affect the whole company. An analysis of every type of payroll, from hourly workers to monthly salaried positions, along with the fringe benefits allocated to each category, needs to be kept current. Payroll management teams need to have all the data presented to them in both summary and detailed forms.

The payroll accounting system must integrate seamlessly with the main accounting system of the company. If it doesn't, endless little details can slip past the awareness of management, and the final balance sheet accounts may not be accurate.

9. Payroll Software

Payroll software has greatly simplified the work of payroll management. A payroll software system that easily handles whatever level of complexity your company might need pays for itself quickly. Good payroll software will integrate the information from electronic time clocks, plus manually enter time sheets where necessary. Pay information and all employee data will automatically be updated with each pay check. Payroll personnel will always be able to count on the pay checks being printed accurately and on time. A safe backup system remains intact at all times.

Payroll service companies rely only on computerized payroll accounting systems now, as these integrate well with current payroll tax laws and regulations. Whether you use a payroll service, or use payroll software within your own company, the American Payroll Association provides extensive payroll processing help.
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