The term payroll is pretty foreign to most of us, except if you have a finance and/or accounting degree. For most of us, this term is synonymous with movie villains and back-alley deals. The schooling system in America doesn’t prepare us for the real world but rather feed us information that we regurgitate for test and exams and forget about immediately after. So, most of us don’t know what taxes, mortgages, bookkeeping, or even what payroll means, but we sure know what PEMDAS/BODMAS or a soliloquy means. Payroll is something complicated and time-consuming that most companies need, which is why some of them use specialized firms to do their payroll. So come along with us and learn more about payroll services and why it is essential, especially if you own a business.
What is payroll?
Payroll is also referred to as the list of a company’s employees and the amount of compensation that is due to the former. It is the compensation a business must pay to their employees for a set period or a given date and is usually managed by the business’s accounting or human resource department. For a small business, it is typically the owner or an associate that is in charge of the payroll, but nowadays, payroll is being outsourced to specialized firms. They handle paychecks processing, insurance, employee benefits, and accounting tasks like taxes. It is a major expense for most businesses and is almost always deductible, which means that the expense can be deducted from gross income lowering the company’s taxable income. Payroll fluctuates and differs from one pay period to another because of variables like overtime and sick days.
How to process payrolls?
- Calculate the gross pay: For the employees that are paid hourly, this means combining the regular hours and their overtime, and this is then multiplied by standard and overtime payment rates. If you use traditional timesheets, then you need to submit that too, and errors need to be checked prior to being approved and this processing period requires a massive amount of time, but this might not be necessary if you hire a professional firm or a time-tracking software.
- Calculate net pay: After the calculation of federal, state, and local taxes according to the employees’ individual withholding information and add insurance, retirement, and any other deductions, and this is subtracted from your gross pay.
- Reserve/distribute deductions: Taxes and other deductibles must be either placed in trust for later payment to the appropriate entity or paid immediately according to the schedule.
- Issue payment: Either print checks or issue direct deposits to your employees
The importance of payrolls
Being paid for your work is the bedrock of employer-employee relations and is dictated by the contract you signed when you joined that workplace. Payroll is crucial for any company to function to its fullest degree but is also very complicated, never-ending, and complicated. Even the most negligible errors can create tremendous headaches, and large ones can land any organization in hot waters and deep legal and financial trouble with both the employee and the government. Despite its essential nature, every little of us knows about payroll and is relatively scarce outside the groups or individuals who actually handle it.
For all your professional accounting payroll services and bookkeeping needs, contact ProfessionalBookkkeepers.ca now. With over 30 years of experience and certified professional bookkeepers, they will organize and declutter all your problems, especially when it comes to accounting and administrations. Payroll is important for your business and is an important thing that all businesses need to pay their staff and stay ahead of the game when it comes to taxes. So, what are you waiting for? Contact them now and let them help your business prosper.