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Payroll
While many aspects of accounting vary between companies, there is one constant – if your company has employees, it will need to account for these employees’ payroll.
Payroll is one of the areas of accounting which small business owners find especially difficult, and as such is often dealt with by an external firm of accountants.
Accountants working in payroll face many challenges associated with the accurate and timely processing of employee compensation, which is often the single largest expense of an organization and as such must be rigorously controlled.
The first challenge can come with the collection of input data. In small companies, this may be as simple as an email from the boss stating how much overtime each employee worked or the basic salaries, but in large companies collecting this data may require liaising with multiple department heads to find out the level of bonuses, commissions and other fringe benefits due to each employee.
As well as details of any new starters and leavers in that financial period. To make things more complicated, you will also need to have the requisite documentation for these people showing their earnings to date, tax code etc.
In some companies, the payroll clerk may also be responsible for paying independent contractors whose work duties could classify them as employees. These are paid, as invoices rather than directly through payroll as it curbs payroll tax and limits benefits.
Providing you have managed to collect all the required information, you can start processing the payroll.
Although this aspect has been greatly simplified since the advent of computerized payroll software, current programs are lacking in the more complex functions needed to calculate the salaries of senior employees whose salaries are tied to company performance, or return on investments. Reimbursement of business expenses also needs to be worked out at this point, providing of course the employees seeking reimbursement are eligible and can produce the correct receipts.
If this doesn’t sound bad enough, you will also be faced with a variety of ad hoc tasks such as calculating statutory sick or maternity pay, pension contributions, as well as a whole host of garnishments.
Having entered all data into the system, it is always a good idea to check for any abnormalities – as a misplaced comma, could result in employees either not receiving what they should or worse still receiving more than they should. If everything appears as it should, you can move onto submission. Firstly, the tax and insurance contributions, which have been calculated for both the employer and the employee, and finally the salaries of the workers which are usually paid by either transfer or check.
Then, it is a case of waiting, waiting for the unavoidable string of queries from workers as to why they paid more tax than in the previous month, why the pay rise they had been promised wasn’t auctioned, why their commission wasn’t paid, along with a thousand and one other questions. The thing which makes payroll such a demanding role, is the fact that this entire process is repeated on a monthly or even weekly, in the case of wages, basis – so you are constantly racing to complete the current periods payroll before the cutoff. What’s more, payroll is one of the more changeable areas of accounting from the legal perspective, so in your free time you will need to keep up to date on constantly changing legislation and benefits.
So, the next time you come into contact with your payroll clerk, take a moment to express your gratitude for their hard work and dedication.
