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How does a payroll system work?

Companies use different payroll systems to pay their employees. These payroll systems serve the same purpose but work differently. When choosing a payroll system, it is important to choose a system which meets your requirements and circumstances.

How it works

Collection of personal details When you get a job, the human resources personnel will collect your personal details like name and address. This information will be inserted in the system and it will calculate your tax, paid leave time and the net salary which will be due to you. There are different types of payroll systems and below are a few examples and how they work. Software payroll systems These are computer software programs which are installed on a computer and do all the work. The human resources only need to enter the employees’ personal details, rate of pay and the number of dependents into the system and it will automatically calculate everything. If there are any changes like salary increase or an increased number of dependents, then the human resources will simply update the employee’s profile in the system.

Other payroll systems

Manual payroll As the name suggest, everything is done manually. The bookkeeper enters the employee’s information into a ledger book. When the month end comes, he will check the deductions, rate of pay and use the tax tables to calculate the net salary. This process will be done for each and every employee. He will then write checks or do bank transfers to employees. Due to technological developments, this method is only being used by a few companies. Payroll processing using computer This is used to deposit the employee’s salary into their banking account. The human resources simply collects the employee’s banking details and enters it into the system. When the payroll runs, the money is automatically sent to the employee bank account. Social security money, state and local taxes are deposited into their respective accounts. Many companies these days are handing their payroll duties over to payroll companies. This is an advantage because it can save you time because the process can be time consuming. Besides, payroll companies are specialists in their own field. There are many payroll companies to choose from. However, it all depends on your company requirements.

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