Irregularities in Payroll processing take a toll not just on employee morale, but also on the productivity of a business. While ensuring timely and accurate payment of wages is important, adhering to local legislation related to labor and employment is also important. Failure to adhere to laws can attract consequences financially and legally.
In order to ensure that employees are productive and the business is law compliant, there’s a need to understand the basics of management of payroll. This article will tackle everything that you need to know.
What is payroll?
Payroll is the list of workers that are paid by a company. It pertains to the amount an employer pays to all its workers as well. It involves, as a critical business function, the following:
- Defining payslip components such as variable pay and basic pay;
- Developing organizational pay policies such as leave encashment policy, flexible benefits, etc;
- Gathering several other payroll inputs including food vendors approved by an organization to provide information on deductions from employee salaries (meals);
- Releasing employee salary;
- Actual calculation of non-statutory deductions, statutory deductions, gross salary, and net pay;
- Depositing dues to appropriate authorities
In a nutshell, the payroll is processing employee wages and arriving at the net pay or what’s due to employees after adjusting necessary or voluntary deductions.
Read More : Small Business Payroll Processing in UAE.
Stages of Small Businesses Processing Payroll
A payroll officer has to perform careful planning. Several ongoing tasks require attention and constant monitoring is also needed for changes to withholdings, voluntary or mandatory contributions, etc.
Payroll processing involves three stages: actual payroll, pre-payroll stage, and post-payroll stage.
- Defining policies – the net pay that’s to be settled can be affected by several different factors. The various policies of a company like attendance policy, benefits policy, leave policy, and pay policy among others come into play. Being the first step of payroll processing, payroll policies have to be properly defined and improved by company administration in order to ensure optimum payroll processing.
- Gathering inputs – the payroll process involves the interaction between personnel and multiple departments. There’s information that’s needed such as mid-year salary revision and attendance data among others. For a much smaller organization, the inputs that are received will be from a fewer number of teams or a consolidated source. For a large organization, however, the task of data gathering can be very overwhelming. This is why it is best to outsource the task of payroll processing to professionals. The payroll outsourcing firm has to include attendance management and input collection.
- Input validation – as soon as inputs are received, there is a need to check data validity, especially data that concerns adherence to approval or authorization matrix, company policies, and right formats. There is also a need to make sure there’s no active employee that has been missed out on and no inactive employee records which were included in the payment of salaries.
The Actual Payroll Stage
- Payroll calculation – during this stage, validated input data will be fed to a payroll system that will be for the actual payroll processing. Net pay is the result following adjusting necessary deductions. As soon as the payroll process is done, it’s good practice for a company to reconcile values and verify the accuracy of items in order to avoid errors.
Post Payroll Process
- Payroll accounting – every single organization has to keep records of its financial transactions. The salaries paid to employees are significant operating costs that are to be reported to a company’s books of accounts. Being a part of the management of payroll, it’s essential that the payroll team checks all reimbursement and salary data that is fed into the accounting system accurately.
- Payout – in the UAE, employers can pay through bank transfer, cheque or cash. Typically, businesses provide employees with bank account details for salary transfers. As soon as the payroll is complete, there is a need for the company payroll team to ensure that the bank account of the company has sufficient funds in making salary payments.
- Reporting – as soon as the payroll run has been completed for a particular pay period, high management and finance teams may ask for certain records. It is the responsibility of the professionals assigned in processing payroll to dig and compile all required information in the reports.
Payroll Processing in UAE
When running a company payroll, statutory compliance means the business is paying as per applicable employment norms that are set by local legislation related to labor and employment. The common requirements applied to UAE businesses include payment of overtime salary to workers and timely payment of salaries.
As it’s a time-consuming, lengthy, and crucial process, it is best to seek the help of experts when it comes to small business payroll processing in UAE. Call us today if you wish to know more about outsourcing these crucial HR services to payroll professionals.