What is a Payroll Management System?
A payroll management system is a software program or system application that is used by companies to manage the financial aspects of the salary of its employees. This system oversees areas related to payroll, salaries, allowances, deductions, and net pay, as well as generating payslips within a prescribed period.
Because it is a software program, the most obvious benefit of using a payroll management system is its ability to automate otherwise complicated manual computations. Computing for deductions, income taxes, benefits, allowances and the like can be done in less time as compared to having someone crunching numbers for each and every employee. This results in time savings as well as a lower incidence of miscalculations attributable to human error.
Using a single system also makes it easier for you to manage employee information, so there’s no need for you to consult various sources for data. Having all the information you need in one place means that reports generation is a breeze — you don’t have to look around in different places to produce much-needed information about attendance, leaves, payroll taxes, and the like. This is useful for tax compliance and legal documentation, as well as during audits where specific reports are required and must be submitted within tight deadlines to avoid penalties.
A payroll management system also promotes better security and helps keep employee data confidential. Tighter controls can be implemented, where only those who have the right access codes or administrative rights can gain entry into the system. At the same time, employees can also log on to view information related to their current status, making it easier for them to keep track of their leave allowances and other benefits.
There are many kinds of payroll management systems on the market, but they can be broken down into three categories: in-house, software, or outsourcing. In-house payroll processing, in its most basic form, usually involves time cards and manually updated Excel spreadsheets. In companies that have the resources for developers, customized programs can be prepared to suit the organization’s needs. Payroll software includes internet- or cloud-based solutions that can capture time, attendance, and scheduling data and compute wages based on that information. Outsourcing, as the name implies, involves companies handing off their data to organizations that specialize in computing employee salaries. All of these options have their pros and cons, but at the end of the day, it’s important to have one system that works specifically for your company’s needs—no two businesses are exactly alike, after all.