The different methods used for payroll

The different methods used for payroll

Payroll is a system used by a company to organise compensation for employees for a particular period of time. It must be compliant with certain laws and for it to be accurate, it’s important to define staff, their pay grades and responsibilities. There are certain laws and regulations that must be followed in terms of hiring employees and methods used for payroll must be understood by all.  

Methods used for payroll depend on the accounting method chosen and in some cases preferences of employees. The method also depends on the complexity of payroll, time and resources. 

Cash methods may typically be used for seasonal employees. This method is becoming increasingly regarded as unfavourable though, mainly because of the lack of paper trail.  

Using direct deposits involves making electronic transfers into employee accounts. This method is simple and efficient. Companies need to take into account that they will be charged a monthly fee for this service. On the plus side, it makes it easier to keep track of all financial transactions. 

Deciding whether to use an in-house system or an independent payroll system is up to company management. The company has to factor in costs that come with the service. So having an in-house accountant or bookkeeper who specialises in payroll may be more efficient for some companies that cannot afford to outsource. 

There are also agencies that specialise in processing payroll. In such cases, the process may be run by trained personnel with up-to-date software. 

Using payroll software is convenient because it makes the data-entry process simple. Inputting data of thousands of employees is less time-consuming too. The software is accurate, so there is a lower chance of mistakes being made. Generating reports is easy too, because the software collates all of the data and does it for organisations. 

Categories: Financial tips