You must activate a subscription known as a QuickBooks Payroll Service in order to make your QuickBooks Desktop Software’s payroll features available. You can choose between Basic, Enhanced, or Assisted Payroll depending on the features you require.
The QuickBooks Payroll service is incompatible with QuickBooks Mac. Intuit Online Payroll is the payroll add-on that Mac users use. Intuit Online Payroll only exports transactions to QuickBooks Desktop and QuickBooks Online when used independently (without QuickBooks Online Payroll).
Note: This article is intended for users of QuickBooks Desktop (QuickBooks Pro/Premier or Enterprise).
You can install QuickBooks Desktop Software (Pro/Premier or Enterprise Solutions) on your desktop to use as accounting or financial software. You handle all your billing, bookkeeping, and invoicing here in one location. It is simple to keep track of sales and expenses, accept payments, scan receipts, and prepare for tax season.
You can set up payroll without a subscription if you decide against using any of the QuickBooks Desktop Payroll Services. You cannot obtain payroll tax forms or have your payroll taxes calculated by QuickBooks Desktop. Each paycheck’s payroll tax amounts must be manually calculated and entered.
Introduction to Payroll
Payroll is the process of paying a company’s employees. It entails gathering a list of employees to be paid, tracking the hours worked, calculating the employee’s pay, distributing the salary on time, and recording the payroll expense.
There’s a lot of background work involved in getting these done because payroll is more than just calculating pay checks. It’s a complex set of procedures that necessitate the collaboration of multiple teams. All these complexities, however, can be easily managed by standardizing processes, selecting the appropriate service delivery model, and utilizing modern technology to manage payroll operations.
Calculating employee pay, recording payroll transactions, and calculating and paying payroll taxes are all part of the payroll process. A company must have a timekeeping system in place that accurately reflects the hours worked by non-exempt employees as well as the regular salary payments made to exempt employees. Employers typically withhold federal income tax from employee earnings and must report all wages, tips, and other compensation paid at the end of the year. Companies must also deduct Social Security and Medicare contributions from employees’ wages and match them.
Here’s a high-level overview of the steps involved in successfully completing payroll from scratch as a business function.
What is Payroll?
Keeping track of employee salaries is an immediate thought that comes to mind. However, there is more at stake for businesses. Payroll has a significant impact on an organization’s net income. It is also a business function that is governed by a variety of laws and regulations. Because of the legal and ethical aspects of payroll, it is critical for businesses to do payroll and keep a clean record of their payroll.
When they are unable to keep a clean record, some of the common misconceptions that spread among employees about your company include financial instability, poor and untrustworthy management.
Payroll is the process of paying employees in a business. Payroll processing entails calculating employee earnings and deducting federal and state payroll taxes.
Payroll can also be used to refer to:
- Employee financial records kept by a company.
- The process of distributing employee pay checks.
- Employee wage records are kept on an annual basis.
Payroll can be a company’s most expensive overhead expense. And the payroll process is difficult. Understanding each component of payroll, on the other hand, may help you better understand your company’s finances. It can also help you stay in compliance with federal and state tax and labor laws.
What is Payroll Process?
Payroll can be a company’s most expensive overhead expense. And the payroll process is difficult. Understanding each component of payroll, on the other hand, may help you better understand your company’s finances. It can also help you stay in compliance with federal and state tax and labour laws.
Payroll Processing Procedures:
- Gather information
When you hire a new employee, you must fill out Form W-4 with their payroll information. Employers are required to withhold amounts for federal and state taxes, as well as money to pay for employee benefits.
- calculate net pay
Net pay is the employee’s gross pay less tax withholdings and benefit payments. You’ll also figure out withholdings for Medicare, Social Security, and any applicable local taxes.
- Make payments
You must pay the employee’s net pay through direct deposit or by paper check.
- File tax returns
You must file a tax return with the IRS and the state department of revenue for federal and state tax withholdings. Retirement contributions, state unemployment payments, Medicare taxes, and Social Security taxes are all reported to other entities.
- Collect and pay taxes
All tax and benefit payments must be forwarded to taxing authorities, retirement plan companies, and other benefit providers.
What information is included in the Payroll?
There are numerous documents that you should keep safe. But here’s a general rule of thumb: If it helps you run payroll for an employee, put it in the payroll file.
Generally, the following documents should be included in each employee’s payroll record:
- General information
- Employee name
- Social Security number (SSN)
- Tax withholding forms
- Time and attendance records
- Total hours worked each day and week
- Time and day when work week begins
- Time off history
- Remaining time off
- Payroll records
- Pay rate
- Total daily or weekly straight-time earnings
- Any overtime earnings
- Benefit and deduction information
- Employer contributions
- Expense reimbursement information
- Raise documentation
- Pay periods for wages paid
- Payroll history
- Time and attendance records
Components of Payroll
Every payroll includes several key components for the monthly salary and wage disbursement. There are several ‘components’ that make up a salary package, both within and between gross and net salary. These are required for employers and employees to calculate taxes, provident fund (PF), medical expenses, benefits, travel allowance, and so on.
One of the most difficult challenges in any payroll management system is framing the salary components. Every salary includes taxable and tax-exempt pay, variable and constant pay, allowances, and deductions.
The payroll must be detailed and accurately marked up in accordance with local laws. Any errors on the payroll can result in non-compliance and monetary fines imposed by regulatory bodies.
The primary components of payroll will be discussed in this article.
- Employee Information
The first step in payroll is to collect all your employee’s financial information. Before an employee can be fully onboarded, they must complete the forms required by governing laws and company policies. In addition to attendance data, working hours, and mid-year salary revision data, some companies track a variety of other inputs. This information must be compiled and digitized for safekeeping.
- Pay Policy
This is the internal payment policy of the company and is governed by local laws. Companies are given more leeway in developing these rules and regulations. Overtime pays, attendance policies, leaves, benefits, and allowances vary from company to company.
- Basic Salary
The basic pay ranges from 35% to 65% of an employee’s total CTC and is the base pay that remains constant throughout the employee’s tenure at the organization. Many factors influence base pay.
These are additional payments made by the company to the employee during their job in addition to other benefits. Allowances differ from company to company and are determined by the employee’s designation. A higher-ranking employee is almost certainly entitled to a larger stipend. Jobs requiring extensive travel and relocation can also result in higher pay. Every allowance is not created equal. Some are taxable, while others are not.
A deduction is the amount deducted from an employee’s pay check each month. These deductions are classified into two types: voluntary and involuntary.
- Gross Salary
This is the total cost to the company of hiring someone. The gross salary, also known as the CTC, is the employee’s pay before any deductions are made. It incorporates all of the deductibles mentioned above.
Furthermore, some employers contribute to their employees’ benefits and retirement plans. This factor is also considered when calculating gross salary.
Gross Pay Vs. Net Pay
Gross and net pay are both concerned with what your employee earns for their work at your company. However, the difference between gross and net pay is determined by when deductions are withheld. Federal, state, and local income taxes, as well as Social Security and Medicare taxes, are all deducted from pay checks. Health insurance premiums, retirement plan contributions, and wage garnishments are all non-tax deductions.
The amount you owe employees before withholding taxes and other deductions is referred to as gross pay. The amount you pay your employee is not the gross pay. You must use gross wages to calculate net wages for your employees.
Net pay is the amount of money an employee receives after taxes and other deductions. Net pay is the total amount you pay your employees. Due to mandatory and voluntary payroll deductions, an employee’s net wages may be significantly less than their gross wages.
Gross pay is the price that attracts employees to your company, whereas net pay is what the employee receives and must spend.
How to manage Payroll Data?
Make a Payroll Calendar
Payroll calendars assist employees in understanding when they will be paid and when timecards are due. It also aids your payroll staff in the planning and execution of payroll tasks. Most payroll software will generate a payroll calendar for you once you’ve established your pay schedule, but you can also create one yourself using a spreadsheet.
Here are some guidelines to follow when creating your own payroll calendar:
- Use a regular calendar as a guide to help you analyse specific dates that may require a lag to allow enough time for payroll processing.
- Use coloured fonts to highlight specific information, such as early timecard deadlines due to a holiday.
- Give managers and supervisors a copy of the calendar.
Allow HR Staff to Attend Payroll Training:
While human resource (HR) professionals are trained to process payroll, their expertise is more focused on recruitment and employee records management.
Consider organizing payroll training sessions for your HR staff to improve your company’s payroll management process. Although the HR and payroll departments play distinct roles in an organization, they share functions that are critical to the success of a business.
The following are some advantages of providing payroll training to your HR staff:
- Improves collaboration: Because many payroll issues are related to HR, collaborating would allow the payroll and human resources departments to use their shared knowledge to develop more innovative solutions.
- Reduces manual/double work: By consolidating some reports, you can reduce the amount of paperwork your staff prepares while also simplifying processes.
- Creates a more cohesive team: If your HR team has a better understanding of your payroll team’s procedures, they will be more sensitive to the time devoted to payroll processing.
- Prevents conflict: Payroll training will help prevent misunderstandings between your HR and payroll employees and will provide all employees with a better understanding of payroll policies.
Standardize Turnover Procedures
One of the main reasons payroll staff turnover is painful is that each company has its own unique payroll processing intricacies; these small details can take significant time for new hires to learn. You should consider ways to standardize your turnover process to reduce the negative effects of losing team members to other companies, moving them to different roles, and temporarily filling positions when employees go on leave.
Some suggestions for improving your internal and external turnover processes are as follows:
- Consider promoting internally first to help minimize the learning curve of new hires.
- Implement a buddy system: Use a buddy system in which each payroll team member trains another on their task.
Automate Your Payroll Process
Payroll processing takes a significant amount of time and money, and when done manually, it is prone to errors that can result in severe penalties. This is especially true for a growing company with a growing number of employees.
Payroll processing can be difficult with limited HR and payroll staff. Keeping up with time-consuming tasks is made easier by automating your payroll process.
If you’re looking for software to help you better manage your payroll, consider Rippling, which has one of the highest user ratings on the market. Rippling is HR management software that lets you manage employee payroll, benefits, third-party apps, and much more all in one place. Rippling simplifies employee management.
Avoid Borrowing from Payroll Tax Funds
If your company is short on cash, it may be tempting to use payroll tax funds. Borrowing from your tax fund, on the other hand, would be a serious mistake that you should avoid at all costs. Poor business decisions like this can easily be overlooked until it’s time to process your payroll tax payment. You may not be able to pay the IRS if you do not have enough money to replace the borrowed funds.
Consider opening a separate payroll bank account for your collected and contributed taxes. This will help you avoid using your payroll taxes to cover other business expenses. You can also establish a cash reserve for your company.
Maintain Transparency in Your Payroll Process
Employee misunderstandings of the payroll system are frequently the source of problems. This occurs most frequently in organizations where pay policies are either unavailable or poorly communicated to employees. Many payroll issues, such as unpaid taxes or employee misclassification (contractor vs. employee), can be resolved by implementing a completely transparent payroll policy.
A clear payroll policy should include the following details:
- The payroll procedure
- Employee Classification
- How are salaries calculated?
- Employee reporting obligations
- Company policies for dealing with payroll errors
- Earnings for vacation
- How are salaries and promotions determined
Document Your Payroll Process
Documenting your payroll process is an important step in payroll management. This strategy aids in the analysis and auditing of your payroll system by highlighting each step and making it easier to identify flaws in the process. Once you’ve determined the best payroll process for your company, document it and share it with the payroll team to ensure that each payroll staff member understands their role.
Keep a standard payroll processing manual on file for the payroll department. All payroll processing steps, as well as reporting and check-handling procedures, should be included. It will also be useful to have instructions on how to manually process payroll in case of an emergency.
Examine Your Payroll Process
It’s not uncommon to hear complaints about payroll computations. However, the frequency of occurrence indicates the need for regular audits of the entire payroll process. This is especially true for businesses that still use a manual timecard system, as they are vulnerable to discrepancies.
Data entry errors, such as incorrectly recording a new employee’s tax status (married vs single) or entering old pay rates, can also have an impact on automated systems.
The following steps should be taken to ensure an effective audit:
- Check and reconcile the accounting, payroll, and cash documentation to ensure that the dollar values are consistent across all records.
- To ensure that your payroll software is properly integrated with your time and attendance system, test plugins or add-ons.
Why Payroll is So Important?
Employees are regarded as the organization’s most valuable resource. As a result, businesses spend a significant amount of time recruiting, training, and retaining enough employees to support their operations. One of the most important tasks is thus the payroll process. Employees must be able to rely on being paid on a consistent and timely basis. Regardless of the organization’s size, payroll is critical to maintaining employee morale and the company’s financial stability.
Payroll processing is typically a time-consuming and complex task. This is especially true for smaller businesses that do not have a dedicated payroll manager. Larger companies may have an entire department dedicated to payroll processing.
Payroll is a complex process that requires close collaboration between multiple departments such as HR, finance, and the team in charge of leaves and attendance, among others. Inputs from these departments are gathered for each employee, and the net amount to be paid is calculated based on CTCs and other deductions such as taxes, LoPs, and so on. The calculations can be done manually using Excel sheets or automatically and without error using software.
Once all input from various departments has been gathered, and if payroll software is used, payroll processing can take anywhere from a few hours to a couple of days.
Salaries must be processed and paid to employees whether the company is large, small, or a conglomerate. That is the one function that is critical regardless of the industry, size, geography, or number of employees. One mistake can result in everything from a disgruntled employee to massive losses, often in the millions of rupees. Thus, the purpose of payroll is to accurately process and pay salaries, maintain employee morale, and trust, and help the company save money.
Salary is the fixed amount of wages or remuneration that an employee receives on a regular basis for their work. It could be done on a daily, weekly, monthly, or annual basis. Payroll, on the other hand, is the system that stores employee data and is used by employers to process their employees’ salaries. Payroll is a necessary workplace function that allows employees to be paid.
The following are the five most common payroll challenges:
- The necessity of remaining statutory compliant to avoid heavy fines.
- Because of the reliance on inputs from multiple systems, any delay can disrupt the entire chain.
- If it is done manually or by a non-expert, the chances of making mistakes are high.
- Inadequate data management and reporting between different teams handling inputs such as time, attendance, leaves, canteen vendors, transportation vendors, and so on.
- Annoying employee habits such as late submission of tax saving proofs, IT declaration, last-minute attendance regularization, and so on.
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