Employees are considered the most important resource of the organization. Thus companies spend copious amounts of time recruiting, training, and maintaining sufficient employment for their business operations. One of the most important tasks thus is the process of their payroll. Employees need to be able to rely on being paid on a consistent basis without delays. Irrespective of the size of the organization, payroll plays a huge role in maintaining the morale of employees to the financial stability of the company.
Typically processing payroll is a time-consuming and complex task. More so for smaller companies who do not have a dedicated person to manage their payroll. Bigger companies may have an entire department dedicated to processing payroll. Medium companies, on the other hand, may find it more efficient and cost-effective to outsource their payroll needs.
Payroll shows an employee what his net worth is within the company. Every individual’s total compensation is built into payroll. This covers everything from their salary, benefits to bonuses, increments. Usually, everyone has to go annual performance evaluations by their managers, after which they are either given an increase in their salary or a bonus or both.
Out of all the aspects of payroll, one of the most important is its impact on employee morale. If at any point in time payroll is late, employees may begin to question the company’s financial integrity. It may eventually lead to employees to start underperforming and be less engaged in their job if they feel it is not secure. They may also look for better opportunities and leave the company without prior warnings. Thus, it is necessary that payroll be paid in a timely manner to keep employee morale high.
Maintain company reputation
Apart from all the financial obligations that the companies have towards their employees, they also have to ensure that all payroll activities adhere to the country’s tax obligations and comply with employment legislation. Efficiently being able to meet these tax obligations on time as well as upholding legislative laws is a sure way to establish the organization’s reputation as a stable employer. It is well proven to be a value-added branding proposition that helps to ultimately attract and retain the right pool of talent to the organization.
Re-allocation of Resources
There are hundreds of manual tasks associated with payroll, which can be an extremely time-consuming and manual job. In addition, it is mandatory that payroll be performed regularly every month. Thus, many times additional resources need to be employed to make sure that the accuracy and precision of payroll calculations is maintained.
It is for this very reason that companies these days tackle this issue by engaging a reliable payroll service provider. Their services allow for a more comprehensive data management and provide companies with the option to generate customized reports.
Payroll is responsible for connecting companies, their employees, and other service providers that collect taxes on the sums they pay to their staff. Hence, it is very crucial that payroll be precise every single time. This precision helps companies to become fully accountable to their partners in the payroll process and satisfies all obligations.
Payroll processing comes across as one of the least interesting subjects, which is why it is vastly ignored by companies and organizations. Payroll is one of the most expensive aspects of a business, which is why it is all the more important for business leaders to understand it’s importance. Hence making a change in the existing ways of processing payroll is a must. Payroll also has a huge role to play in positive company culture. Employees will always value an attentive payroll team. Some of the ways in which payroll processing can contribute to positive company culture are discussed below:
- The reputation of a company is solely dependent on its security and stability. The most important aspects of the payroll team include its reputation, qualification, and how trustworthy the members are. Such a payroll team will help prevent fraud, maintain conformity and submit critical documents within scheduled deadlines. Building a strong and capable employer brand is a must because negative publicity will cause harm and damage. The payroll processing services of a company have to be managed well and the security top-notch because that will cause fewer errors. This will ensure that the company's reputation is upheld and maintained.
- The progression of employees in a company is critical, especially for those who are planning to stay long term. Employees would want to gain promotions, advance within their teams, and build on their skill sets. The success of a company is primarily based on employee recognition. The best way to recognize the achievements of employees is by providing them with company benefits and monetary and social recognition. The task of rewarding employees for their contributions is managed by the payroll processing team; hence their efficiency is a must when it comes to employee recognition.
- Increasing employee engagement is a must for a company to move ahead and achieve milestones. If the payments are not made on time, the employees will feel undervalued and demotivated, which means their will to work for the company will dwindle. A reliable payroll team will communicate properly with the employees and pay their dues consistently on time. This will make sure that the employees have confidence and trust the company that they will get reimbursed.
Employees will also be assured of the fact that their questions regarding salaries and payments will be rightly answered and they will have good faith in the company. This will lead to increased employee engagement and boost the morale of the employees. Hence payroll has more than one important role to play in the smooth functioning of a company.
There exist many companies till date that prefer to get the payroll operations done in-house with the help of manual bookkeeping. However, the majority of companies nowadays prefer to outsource payroll processes. Many company owners like to weigh the pros and cons of outsourcing payroll, but the fact that cannot be denied is the resources and time required to complete payroll operations is quite a lot.
Payroll responsibilities are not only time consuming but also complicated. Hence it is advisable to outsource payroll functions for smoother functioning of other operations in the company. Here are a few reasons as to why you should outsource payroll processing:
- During every pay period, each and every employee must have their total number of work hours calculated and even get the verification for accuracy. Then the total number of hours has to be multiplied with their designated pay scale, and along with that, the total amount of taxes have to be calculated and deducted from the final salary to determine the final amount.
Now there are many employees who receive company benefits or have other deductions going on, such as retirement plan contributions or child support; for such employees, additional calculations have to be performed. Hence the total number of employees and the total calculations turn out to be huge numbers and a laborious process, which is why it is advised to handover such responsibilities to the people who are experts in such fields.
- Once the total amounts are calculated for each employee, the physical cheques have to be signed, printed, and distributed. Some employees might have their amounts deposited directly to their bank accounts, which means those amounts have to be verified and processed electronically. In addition to all of this, the records of all these payments and transactions have to be properly maintained for reporting and tax purposes. All these activities have to perform with utmost accuracy, which is why it is best to allow payroll processing companies to handle the job.
- Whenever a payroll period ends, the amount of pay earned by all the employees and all the benefits and miscellaneous deductions that have been withheld, and all the payroll tax amounts have to be cautiously recorded for future accounting needs. The structure and size of the business will determine if the payroll reporting has to be included in the fiscal year-end report.
The payroll reporting has to be included all the more for those companies which are publicly traded or looking for investors. Many company owners also require previous payroll reports for hiring purposes. The payroll figures are also essential for tax purposes. It is required for annual payroll tax reporting as well as quarterly tax reporting.
Sometimes the reports are also necessary for business year-end income tax filing. All these reports and figures have to be kept organized and accessible for future uses, and this takes up a significant amount of time every period. Hence outsourcing the payroll operations will help company owners save up on time to invest it elsewhere for more productivity.
- Payroll errors can be a costly affair for both employees as well as employers. If there is a mistake in the state tax deductions, then that will take a heavy toll on the employee’s final paycheck of the year because there will be a sizeable tax deduction. Improper pay rates can also lead to a decrease in the employees’ final pay, and this will lead to resentment and frustration among employees.
- A company owner cannot afford such mistakes because it will negatively impact employees and result in a strained relationship between the employer and the employees. Employers will also have to suffer from payroll mistakes because it can lead to them paying fines and penalties. Employers are legally responsible for cases of misrepresentation and failure of reporting employment taxes accurately to state government agencies.
Any kind of mistake can lead to audits, and that is something no business owners want. If payroll processing is done in-house, then the risks involved are plenty, and they will be more prone to mistakes. It can cost business owners hefty amounts in the long run; hence it is better to outsource payroll.
Pay is compensation, and employees are working to get paid, no matter the value of their job. Hence it is very crucial to encourage them for their contribution in building a company and recognize them for their job. The payslips that they receive at the end of the month makes them feel validated. Employees who receive benefits and are compensated for their extra inputs and hard work feel respected and valued.
To engage employees more in their work and for the overall benefit of the company, the payroll department has to be flexible because that means the employees are being compensated on time and for their overall performance. Hence it is very clearly evident that payroll teams are the major contributors to positive company culture.