HR Software: A Guide To Payroll And How It Works

May 15, 2021

Payroll, a popular word used in businesses, in simple terms, refers to the workers of a company. Any organization that has employees will have an active payroll system, as it is legally mandatory in every country. This article will give a small guide on what payroll is and how it works. 

What Is Payroll? 

Payroll is a term that refers to the employees of an organization and certain information about them that heavily focuses on their respective compensation or pay. It is also known as the total compensation a business organization is legally entitled to pay for its employees, for a set period of time or a given date. 

Payroll is a major expense for any business and is deducted from its gross income. Payrolls lower the taxable income of a business. The payroll process of an organization can vary based on their policies relating to overtime, sick pay, maternity holidays and related variables. But in every country, there are certain regulations like income tax and EPF/ETF concerning payrolls, and businesses are legally bound to comply with them. Non-compliance of a company’s payroll to these regulations can cause fines to the organization and other legal issues. 

Who Maintains The Payroll Function Of An Organization?

Payroll is a function usually maintained by the HR or accounting department of an organization. So you may hear this term more from HR or accounting professionals. In startups and small businesses, this function is often handled by the owner itself. In contrast, for medium and large-scaled businesses there is a dedicated department, sometimes as a subdivision of the accounting or HR department to handle the payroll function of a business. 

Nowadays payroll function is increasingly outsourced, allowing specialized firms to handle a company’s payroll in a much more efficient manner. 

How Is Payroll Processed?

Payroll is a complex process that needs tight and precise collaboration between multiple organizational departments, especially, between hr and accounting departments. Once the required input is gathered from the relevant department, the net amount that has to be paid for an employee is calculated in accordance with the law and other company policies. 

Generally, when a payroll is processed for an employee, the net amount is calculated by taking into consideration deductions like EPFT, ETF and taxes. 

These calculations can be done manually or using reliable hr and payroll software. Processing payroll manually will require precise records, accurate calculations and filing the necessary documents with government authorities. Manually processing payroll comes with the risk of errors which can result in costly penalties. Using software for this process can ensure an efficient, hustle and error-free payroll for an organization. 

Most countries legally require companies to hold tax records for up to four years. During this period your company will be expected to produce an employee’s personal information, their amounts of tax payments, dates and amounts of salary or wage payments made, retirement payments, reimbursement or any other necessary information requested.

Storing these details safely for the legally obliged period is risky. This is why many companies now opt for HR cloud-based software where they can safely store and retrieve payroll data and information whenever needed. With zero-paper work involved, it also makes payroll processes simple, efficient and cost-effective. 

If your company is looking for an HR and payroll solution in Dubai, we at EmiratesHR can help you with a personalized platform to serve all your payroll processing requirements efficiently.