Business Systems

What is Payroll?
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What is Payroll?
At this chapter, the students must be able to have a background on
payroll systems. It would be best to define first what the different terms
used in payroll systems. Examples will be given to the students for them
to understand the concept more. The instructor may provide examples of
existing studies or systems that they can get from items found on the
internet or other resource materials.
Payroll Processes and Concepts
Payroll is a financial record of wages, net pay, paid vacations, and
deductions for an employee. Basically, it is anything that relates to giving
money or benefits to an employee. This is one of the more complex
tasks in terms of accounting, because there are many different accounts,
people, and agencies involved in the act of paying an employee's salary.
Businesses that require a comprehensive employee pay processing and
reporting system need a software program that makes this complicated
process easy. Payroll software provides features like flexible time entry,
tax tables, leave calculations, earnings/deductions templates, benefit
tracking, payroll check printing, and payroll reporting. As businesses
continue to grow, the need to provide timely and accurate payrolls can
be crucial to any business.
Payroll software is used to aid in automating and providing timely and
accurate payroll processing for all types of employees. Payroll software
has built-in functions to accommodate the life cycle of payroll
processing. Some payroll software can be integrated with existing
applications or be customized for your environment. Payroll software
can also create special payroll runs, evaluate data and reconcile payrolls
and quarter-ends with online analyzes, generate cost accounting and
labor distribution reports, secure sensitive payroll information, and
prepare payroll taxes.
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Payroll System Benefits

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Payroll System Benefits

Depending on your payroll needs and the payroll software, you may
expect several benefits form using payroll software to run your payroll
process functions. Some of the benefits are:

Lower payroll production costs through improved accuracy

Fast identification, analysis and reporting of adverse employee
costs or trends
Reduction of administrative overhead
Automation of many manual processes
Provides timely payroll processing

The growth of payroll services has been phenomenal over the past 15 to
20 years. Top payroll service companies are experiencing rapid
expansion. Payroll outsourcing is becoming popular all over the world
and is growing steadily. Complete payroll services, once a luxury, now
has become widely available and affordable (that is, if you know where
to look).
As one software company said, A good payroll service company can
accurately fulfill your payroll obligations through the means of
professionals. Outsourcing companies will work with your data, manage
Payroll Systems

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Payroll Terminologies
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your payroll, compute taxes, distribute money, and more. Dont worry
about the ever-changing tax laws and regulations, tax calculations, and
local authorities. Avoid the headache and find the future of payroll
services. This only means that payroll systems that are developed are
flexible and adaptable as what any system should be; ready for any
changes brought about by the environment and other external factors.
[Payroll System Benefits, Page 2 of 15]
Payroll Termonilogies
TERM
Definition
Payroll Calendar, Cut- The payroll calendar is provided to the
off Date, Payroll Day company at the beginning of each month. The
calendar includes the cut-off date which
determines the deadlines for submission of daily
time records (DTR); dates that the trial and final
payrolls will be processed and the payroll date
when the employees will be paid. It is important
that all deadlines are adhered to in order to
ensure that employees are paid on time. During
holidays and/or the end of the year processing,
the usual deadlines and procedures may
change. Departments are notified by the Payroll
Specialist of any changes to normal processing
of payroll.
Daily Time Record
A document that shows the time the employee
(DTR)
logged in and the time the employee logged out.
Basic Pay
Financial compensation an employee receives
for performing the job, and part of your
compensation package. Can be determined by
hourly, daily, weekly, monthly, and yearly.
Gross Income
The amount earned working before taxes and
other deductions are taken out. This includes the
basic pay as well as other allowances,
honoraria, overtime pay, etc.
Net Income / Net Pay / Total income after taxes, deductions, and
Take-home Pay
allowances has been subtracted from gross
income.
Deductions
Amounts subtracted or withheld from your gross
income. Sample deductions are taxes (as
required by law), mandated contributions, loans,
etc.
Adjustments
A correction or modification to a previous
computation of salary.
Overtime
Work beyond normal established working hours
which usually require a premium to be paid to
the employees concerned.
Tax Table / SSS Table Different tables that dictate how much will be the
/ Philhealth Table /
equivalent deduction should be which is usually
Pag-ibig Table
based on the gross pay or basic pay.

[Payroll Terminolgies, Pages 3-5 of 15]

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Payroll Processes
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Payroll Processes
There are several processes in generating the payroll of employees. For
the students to better understand how it works, the following section will
process how the things work.
It must be assumed that there is already a datable of all employees with
the basic fields such as employee identification number, name, address,
birth date, etc. Together with it should be the employees department,
position, basic salary, hourly rate, etc.
1. Time Monitoring System
This would monitor all the time-in and time-out of the
employees which will be the basis for the computation of
the total hours they have worked.
Moreover, tardiness, absences, overtimes and leaves
can be monitored by the use of this process.
2. Timesheets Review and Signature Approval
Employees must complete their timesheets, sign and
submit them to their supervisor for approval. The
supervisor's signature on the timesheet certifies that the
time is accurate. And the supervisor's signature on the
leave request certifies that the leave is available and
approved to be taken.
Timely Submission of Timesheets - It is imperative that
all timesheets with attached leave requests are signed
and submitted to the accounting or human resources
department prior to the deadline. Any timesheets that
are not signed cannot be processed by the payroll
department and may delay the payment of wages. Late
timesheets and leave requests may result in incorrect
leave accrual balances on the next period's earnings
statement.
3. Payroll Computation
Once the time has been entered into the system, the
attendance summary sheet is prepared and validated by
the respective departments. It is imperative that the
attendance summary sheet is checked for each
employee and that any discrepancies or corrections are
submitted to the payroll department immediately. This
process is an opportunity to correct mistakes so that the
final payroll is accurate and employees are paid
correctly.
Since the deductions due to tardiness and absences
have been computed, the gross pay (inclusive of
overtime pay, honoraria, and allowances) can be
computed.
Overtime pay should be computed based on the
companys policy on what the rate will be. Moreover,
holidays must be computed based on the governmentmandated rate.
All deductions such as withholding tax, company and
government loans, SSS/GSIS, Pag-ibig, Philhealth and
other mandated contributions would be then deducted to
produce the net pay.
Adjustments, if any are also included in the computation
of the final pay.

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4. Preparation of Reports
Once that the computations are all done, several reports
may then generated to be forwarded to the respective
agencies.
Payroll Summary this is a detailed document that
shows the different fields of the generated payroll result
which includes the employees names, basic pay, gross
pay, deductions for each entity, other earnings, etc.
Pay Slip A detailed document showing your gross
income, deductions, and net income. This document
confirms that you've been paid, usually on a weekly,
semi-monthly or monthly basis on that particular pay
period. Some people receive their wages directly into a
bank; others may get their payslip along with a pay
packet (containing cash). It also tells you what's been
skimmed from the net pay: either compulsory or
voluntary deductions. Usually printed in duplicates, one
copy each for the company and employee.
Bank Report The document forwarded to the bank in
cases when the actual salary is released through the
bank. It is customized following a format that is set by
the concerned bank.
Government-mandated Reports SSS, Pag-ibig,
Philhealth, etc.
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Payroll Documents
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Payroll Documents
The following are the payroll documents available in a payroll system:

Time Card/Daily Time Record

Payroll Summary Sheet
Payslip
Remittance Report (Bank)
Leave Form
Overtime Form
Tax Table

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