What is a Payroll System?

What is a Payroll System?

A payroll system is something used by employers – and payroll companies on their behalf – to ensure that their employees are paid correctly for each payroll period (usually weekly or monthly) and that necessary deductions, such as tax and national insurance, are removed from gross pay and paid to the relevant tax authorities on behalf of the employee.

Types of Payroll System

Payroll was traditionally completed using spreadsheets and a pen or a pencil. However, most businesses now use automated payroll software in order to save time and limit the potential for errors with employee wages.

Even with automated or software based payroll systems, there are some differences between the types available. Many businesses require employees to sign in and out at the start and end of their working day. A supervisor or a manager will take these sheets, usually on a daily or weekly basis, and input the data into the payroll system based on what has been written on the sheets. Even if a payroll system has been set up with contracted hours and days of work, these still need to be confirmed each week based on the sheets.

The modern alternative, and one that is making its way into more businesses, is to use a clocking system, often fingerprint identification based for security reasons, to track when an employee has been present at work. Such systems then send the data directly to the computer system, so that a payroll manager within the company simply has to double check, make any adjustments, and confirm without having to enter everything themselves.

Importance of Payroll Systems

Payroll systems play a huge role in business operations today. Not only do they ensure that employees are paid correctly, but they’re increasingly used to help business leaders and department managers budget and plan employee labour correctly. The more advanced payroll systems currently on the market will show managers their physical monetary spend on payroll against a pre-set budget, and also alert them should they be exceeding this or be in danger of doing so.

Added Features of Payroll Systems

As well as monitoring working hours, attendance, and labour expenditure, the best payroll systems available today enable managers to view and manage employee tasks in order to make their workforce more productive. Specific labour planning tools are usually a feature of these platforms, while some can even be used to store all data relevant to an employee, including details of any performance reviews or warnings they may have received.

Modern payroll systems not only ensure employees are paid correctly and the necessary deductions are made, but can also be a great management tool within business.