What is a Payroll System?

Whenever a business has two or more employees, then you should employ a payroll system. Every company is mandated by the government to always have a payroll system in place so that employers can effectively calculate their employees’ wages and so that they comply with the government’s legal and tax requirements, among many others.

Small business owners would usually rely on a manual system. Not only is this time-consuming, but it can be prone to errors which is why most employers would rather outsource their payroll function to an external service provider instead.

Should you decide to create company payroll in-house, you should definitely get some payroll accounting services in Malaysia.

For you to better understand everything that I said thus far, I will talk about the payroll system in this article.

Employee Hours Rendered

Every company is mandated by law to pay their employees based on a set system. Most businesses would follow the system where they pay their workers based on the hours they’ve rendered in service.

The payroll system basically calculates the amount of money that you owe to your workers based on certain factors such as hourly wages, the number of hours rendered, and if a vacation or holiday leave is factored in based on company rules.

The said system will then adjust the gross pay of the employees by subtracting all of the above-mentioned factors and you will be left with their net pay.

When it is time to pay your employees, the system will then give the checks or payroll deposits, as well as a brief summary of the information that is used to help calculate their net and gross wages.

Withholding and Taxes

An employer is obligated by the government to process their employees’ tax information. That is why a payroll system is used to help you automatically get the data that you need.

The IRS would provide W-4 forms and the system will use the information stipulated therein and adjust the pay of the individual employee based on that. It will also generate a W-2 form at the end of the year which the employee can use to file their tax returns by mid-April.

The system can also help you calculate the amount of payroll tax an employee owes and will also generate automatic payments to the taxing authorities. It could also be adjusted to process other payroll deductions as well, such as voluntary employee deductions and wage garnishments, among others.

Reporting

The system can help create payroll reports and it can help employers manage one of their highest expenses- labor. It will automatically create multiple reports regarding the hourly rates of certain employees and how much nonexempt employees will get as well.

Such systems usually include pre-made templates that will help financial managers easily find out what their payroll costs are for a certain period of time. They can also use it to check other important data, including vacation balances, headcounts, and it will also help sort employees’ wages based on the lowest and highest earners.