Payroll process is composed of required and necessary steps to be able to pay employees properly. It is important to manage and periodically pay the employees based on the hours they have worked for.
As an employer, you are bound to the regulations mandated by the Labor Code and you must comply at all times to prevent being in conflict with the law.
The Payroll Process
The payroll process starts as soon as you hire your first employee. Each pay period, your employees work and you must pay them based on their hours and pay rate. However, before giving the employee their paycheck, you first need to process deductions such as taxes and insurance if there are. The result is net pay, provided to the employee in a paycheck, direct deposit or other method such as a payroll card.
How to Process Payroll—Manual, Software or Service
Processing the payroll will take some time depending on how you handle it. Some small businesses manually track employee hours and earnings on a spreadsheet. This method takes the most amount of time while there are higher chances of producing errors. While others efficiently and conveniently use free software or an online payroll calculator to properly and surely process the payment of their employees.
Residing to do your processing manually may take you a day or so to process payroll for just a few employees. This is because you have to add up timecards, calculate pay and overtime and process deductions manually. You also have to set aside taxes that have been deducted for each employee, so they can be paid.
So, it is really recommendable to use payroll software or a payroll service to ensure that your payroll is processed quickly and correctly based on federal, state and local laws. Read our article on best payroll services to choose which works best for you and save yourself hours of manual work each pay cycle.
Payroll Process FAQs
Here are some common questions which might bug you while processing your payroll:
What if I made a mistake on a pay-check after Processing Payroll?
Committing a mistake on an employee’s pay-check can be fixed on the next pay cycle using what’s called retro pay. However, some banks require you cut the employee a check immediately if you owe them money.
What About Paying Terminated Employees?
This will depend on existing laws and regulations. However it also depends per company. Some companies pay a terminated employee by the end of the next pay period. However, some also immediately pay their employee upon termination if the employee was fired. Some pays in time frames starting from the same day, up to 30 days (or the next pay period), whichever is sooner.
What about Payroll Taxes?
One of your expectations as an employer is to make tax and other payments to agencies such as SSS, Philhealth, and workers compensation, on behalf of your employees. You can do this with accounting software. However, most payroll software also does this for you.
If you’re doing payroll manually, you’ll need to plan to pay the taxes calculated and deducted from employees’ pay-checks each quarter or more frequently, depending on the size of your payroll.
The Bottom Line is that the payroll process itself is just pretty basic. You just have to count how many hours employees work and pay them for those hours however, the labor laws affecting payroll are complex. Therefore, we recommend business owners find a payroll provider that can manage those complexities, link to tax tables and ensure labor law compliance. A good payroll provider frees a business owner to focus on what they do best—manage their business.
