In payroll accounting, a payroll is a list of all employees of a certain organization who are entitled to get different salary payments and other labor benefits from the employer. When an organization has just been set up, the director usually sits down with the payroll officer of the concerned department and goes through the payroll list. This procedure is usually very simple as all the details are mentioned there in order to make everything clear and nothing is left out. If the payroll is not submitted on time then the concerned department heads will have to step up and make the necessary amendments. There are also certain rules which must be followed by each department head and this includes the inclusion or exclusion of certain employees. Every employee is assigned a payroll line which is used to calculate the salaries and other payments.
There are various systems which are followed in calculating and computing the payrolls of the employees. The two most commonly used systems are the cash system and the check system. In the cash system, there is an addition made to the net income which is received by the employer. This is because a portion of the income over and above the salaries is paid to the employer as tax. When it comes to the computation of the payroll taxes, the net income and not the gross income is taken into consideration.
In a small business, it is very crucial to minimize errors in every payroll process. It is very important for every employee to know the exact amount of salary and all deductions that he is eligible to make. This will make it easier for him when it comes to filing taxes at the end of the year. When there are too many numbers to crunch then a manual calculation method can also be adopted. In this way, there are chances of wrong calculations. Though this may seem like a tiresome task, but in the long run, it will save the small business a lot of money as it will be avoided from employing the services of professional payroll services.
The federal government has brought up several rules and regulations that govern both the employees as well as the employers. The laws clearly specify which are the employee’s rights and what are the employer’s responsibilities towards them. When these two collide, there are chances that both parties will have to suffer consequences. Hence, the need for a reliable payroll taxes service becomes crucial in such cases.
The payroll system is essential when it comes to paying the salary and wages of the employees. This is a form of payment that is given to the employee on a weekly, bi-weekly or monthly basis. Usually, the employer pays the first paycheck and then gives an extension to the employee till the next payday. The second paycheck is made after the employer receives his taxes at the end of the year. Thus running payroll system is essential for both the employer as well as the employee.
However, when the company has more than one department, there are chances that different departments are not paid at the same time. For example, when a department gets paid on a bi-weekly basis, the employee would be able to get his salary for that period only. Hence, if the payroll system is not running properly, the employees wages might be delayed and he might be left without any allowance for his other bills. Hence, running payroll system is really important for every business irrespective of its size.