Processing a company’s payroll is one of the most meticulous and important aspects of running a business. This process is not only about giving salaries to employees as there are many other things to consider to make sure everything is done appropriately and accordingly. Bigger companies and businesses usually have a separate department to take care of the payroll, but for smaller businesses, outsourcing this task is almost always the most ideal alternative. As a company owner, whether you choose to conduct the payroll services within your own company or you prefer to outsource it, it remains necessary that you have a deeper understanding of what payroll is all about.
Kinds of Payroll Systems
Generally speaking, there are 3 types of payroll systems, namely computerized, manual, and external. In some cases, it is possible to combine two of these systems together. However, there are some risks involved should you decide to combine in-house payroll processing and outsourcing, for instance. This could even result to you having bigger problems and even IRS penalties.
COMPUTERIZED PAYROLL: In this day and age, there are so many different types of computer software designed for payroll processing. In this process, data is inputted into the computer, which will be the one to perform all the necessary calculations. You will also find software programs that can process your W-2 forms. The advantages of this type of payroll processing are that it is not time consuming and comes with fewer errors. However, it may not be very simple to correct the errors made during the computation and it could take some time to modify the information in it in case employees are fired or hired.
MANUAL PAYROLL: In a manual payroll processing, it would either be the employer or a company employee who will do the calculation of salaries every pay period. The entire process involves assessing insurance, vacation time, taxes, and many other deductions applicable to each and every employee. In comparison to hiring a payroll service company, this is less costly. However, just one employee handling the computation may not be enough. The person in charge of the payroll computation will also be spending a lot of time to make sure there are no errors in the salary and tax computations.
EXTERNAL PAYROLL SERVICES: Many companies are now opting to outsource their payroll services. In this case, another company will be the one to process the company’s payroll, complete all tax payments as well as generate reports at the end of the year. At first glance, you may think this idea would cost the company a lot of money. But the truth is that outsourcing payroll services can prove to be very efficient and cost-effective as well. The good thing about hiring an outside company to handle your company’s payroll is that they are liable for all the mistakes and the problems that could arise later on due to improper salary and tax computations. However, it is still very important to choose the right and most reliable payroll company to ensure quality and reliable payroll processing.