5 Basic Steps to Payroll Processing
Paying meticulous attention to the payroll process is essential to ensuring your employees are promptly compensated and that your business continues to operate seamlessly. Processing payroll is a detail-oriented task that requires time and concentration so all the steps are accomplished correctly. Improper payroll processing can have adverse effects on your business and your relationship with employees, so it’s always important to get it right the first time.
Here at 3rd Arm Admin, we’ve mastered the essential steps of payroll by providing years of payroll services to our clients. Here are the 5 basic steps that lay the foundation of accurate payroll processing while preventing costly payroll mistakes:
1. Choosing a payroll schedule
There are three common payroll schedules, namely: weekly, fortnightly, and monthly. A business’ payroll schedule determines how regularly you pay your employees and should take into account the structure of your business and how it operates. Your payroll schedule should suit your particular business needs and “make sense” in the grand scheme of things to optimise your cash flow.
2. Logging employee information
This step is imperative for accurate payroll – every bit of information related to employee wages should be recorded accurately. Payroll records include hours worked, timesheet records, base salary amount, any overtime amount, bank account numbers, IR numbers, date of birth, tax code and Kiwisaver details.
3. Calculate gross amount
An employee’s gross amount should be based on their salary or hourly rate. However, this amount can vary during each payroll schedule due to factors such as overtime, bonuses, leave days, sick days, commission, to name a few. Make sure everything is accounted for in this step so your employee is receiving the correct amount of compensation for their work.
4. Determine payroll deductions
After calculating an employee’s gross pay, you can now determine the deductions. For NZ employees, deductions include taxes for IRD (PAYE or Withholding Tax), KiwiSaver, student loan payments, child support payments, union fees, court fines and others. Ensure you then complete your monthly (or twice monthly) filing with IR on time and any other deductions made are paid on time. Late filing, late payments, and shortfall payments all have penalties that can quickly add up.
5. Create a payslip and distribute
All the information regarding an employee’s remunerations and deductions should now be clearly presented on a payslip and given to respective employees confidentially. It should be consistently organised in a way that makes it easy to find the correct information. You should then transfer the funds to the employee’s bank account via electronic fund transfer and make the appropriate payments to IRD for salary and wage deductions.
Payroll Services from the Proven Experts
3rd Arm Admin has provided payroll services for many businesses in the larger Wellington area. With our combined experience and expertise, we provide complete administration and bookkeeping solutions customised to suit you and your business needs.
Talk to the 3rd Arm Admin Team today about how we can seamlessly complete all your bookkeeping and administration tasks so you’re able to free up time and resources for actual business development – just call 04 232 9199 or fill out your details below and we will be in touch!