- Learn more about the advantages of outsourcing payroll.
- The advantages of outsourcing payroll allow you to maximize resources.
- Identify the composition of your employees’ payroll to compute it properly.
Your company won’t be able to achieve its goals without your employees. Your workforce is the engine that makes your organization go. One of the ways to keep them satisfied is to pay them right and on time. This is why you need an efficient payroll management system to release salaries on schedule and the computation must be spot on. Mistakes in the calculations might cause delays that might affect the morale of an employee.
It’s important that the team managing payroll are experienced in what they do. They must know the proper components of your company’s payroll such as base salary, tax deductions, incentives and bonuses, and compensation for vacation leaves. If they lack expertise and experience, mistakes are likely to happen during the payroll process. A well-managed payroll also ensures compliance with legal and statutory requirements.
The compensation package you offer prospective employees can be a determining factor whether they accept your job offer or not. Your payroll team plays an important role in providing you with the financial data you need to make projections and budget allocations. You’ll need precise information to make sure your computations are correct. You’ll need to consider all the components of your payroll. One missing item can also result in miscalculations that can reflect on an employee’s paycheck. This has a negative effect on their morale and this can lead to a high turnover rate.
What’s in your payroll?
Base Salary
The salary is the main component when you calculate the payroll of your employees. You have to compute the gross and basic salary. The former includes the bonuses and benefits which are taxable up to certain limits. Basic salary is the amount employees make excluding incentives and without deductions.
Paid Days Off
When you calculate your employees’ gross salary, you should account for holidays. You also have to include maternity or paternity leave, sick leave, and other paid days off you provide as a benefit. Paid time off allows employees to take time away from their work while still getting paid at their regular rate.
Overtime Pay
Your employees might need to render overtime work to complete projects and tasks assigned to them. Client deadlines might necessitate extra hours. The rate for overtime compensation varies depending on night differential, working on holidays and weekends, or other parameters. You calculate these separately and then add them to your employees’ salaries.
Bonuses, Allowances, and other Incentives
You can offer new and current employees’ different kinds of benefits whether in cash or kind, which you can add to their basic salary. You can incentivize good performance with monthly or yearly bonuses, commissions, and others. Offer allowances for employees that go to clients or for meals, gas, transportation or other needs related to their job. If you have the budget, you can offer fringe benefits such as gym, golf club, spa, and/or resort memberships, transportation, and upgraded healthcare.
One of the advantages of outsourcing payroll is that you have experienced accountants who can calculate and include the above-mentioned benefits when you make financial projections and allocate your budget.
Possible Reimbursements
When employees use their own money for company-related expenses, they can get reimbursed. Communicate to your employees’ which expenses are included for reimbursement. Employees should keep official receipts to make monitoring transactions easier. Some of the expenses often covered for reimbursement include accommodation, transportation, food, and others.
The items mentioned above are part of the computations for payroll. One of the advantages of outsourcing payroll is that your team doesn’t have to do these. You can delegate this task to an outsourced service provider. You should also be aware of deductions before you release salaries to your employees.
What are the deductions?
Employee Contributions to Social Security Benefits
Employees also contribute to government social security benefits. You as an employer deduct this amount from their salary. Make sure the computation is right so that your employee gets their full pay for the cycle. Employees contribute to various types of benefits such as housing and pension just to name two.
Tax on Income
Employers deduct a tax on employee income. For the Philippines, employees are in tax brackets that determine the percentage of tax an employer will deduct from their salary. The higher the salary, the higher the tax rate. However, there are exceptions that companies need to follow as long as an employee meets the criteria. The advantages of outsourcing payroll include precise computations for income tax.
Voluntary Deductions
In some cases, employees would volunteer deductions on their salaries. They might want to fund a house, a new car, travel to a new destination, invest, or others. Employers can comply with these requests and deduct a percentage from an employee’s salary. The computation depends on the total amount that an employee wants to loan.
Payroll contains multiple components that require precise computation. A mistake with one entry can cause problems with deductions, bonuses, premiums, and government social benefit contributions. You’ll need an experienced team to keep your financial records spotless and accurate. Outsourcing payroll is a viable solution or complement to your accountants.
Who should you outsource payroll to?
When you outsource payroll, make sure to choose a company that has the experience in providing such a service. Manila Bookkeepers is an accounting company in the Philippines you can rely on to deliver first-rate services. Their team can deduct the right percentage for income tax and government social benefits. They can compute the bonuses and incentives you would like to include in an employee’s basic salary. With precise information in your payroll, you can create financial forecasts which you can use to allocate your budget to different aspects of your operations. Outsourcing payroll is a cost-effective strategy that allows you to maximize profits and complement the needs of your own team. Consider all these benefits so that you can make a strategic decision.
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