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payroll management

Payroll cannot be seen as just another function of Human resource management. The human resources of any business are vital, so payments for their services become crucial. To explain it in simple terms, it is that one window which opens to the details of the employee and their activities. This, in turn, helps in computing salaries, tax deductions, bonuses, etc. This is bound by the laws of the country which makes the function pivotal. So, small, medium, and big businesses have to give top priority to payroll management.  

What is Payroll Management

As a definition, Payroll Management is the process of managing the employee’s financial records by the employer. It helps in building the remuneration strategy of the company (like when and how) and provides the detailed break-up of the salary according to the billable hours, tax deductions, overtime payments, etc.

 Small Businesses however have to additionally make a knowledgeable decision on how they are going to manage the payroll. Accuracy in tracking and maintaining the records is the primary goal. The slightest errors in payroll management would cause serious repercussions on the business in terms of huge penalties to be paid. Additionally, it impacts the goodwill of the business. To quote Benjamin Franklin, on the subject of Tax- “In life, only two things are certain- death and taxes.” The importance of accounting to any business can thus be summarised.

Different systems of Payroll management


There are multiple ways by which payroll management can be effectively performed. These may be practiced individually or customized according to the nature of the business and the cost involved. 

The three major systems are:

  1.     In-house managing
  2.     External hiring or outsourcing
  3.     Using payroll management software

In-house payroll management is usually followed when the number of staff and the money to spare is low. The person in charge must be an expert or human errors may pry in. The main disadvantage is the liability of errors caused due to ignorance.

Outsourcing of payroll management is an effective method as the person/ team will always be updated regarding the rules and regulations. Choosing the right team will help the business to concentrate on its core activities.  The disadvantage, again, will be the possibility of human error if a less competent team is chosen.

Using software to manage payroll is highly effective but costly. They are mostly used by big businesses where the number of staff employed is high.  

Tips for Effective Payroll Management

quick tips

Clear payroll policy

A well-structured payroll policy will give a clear picture to employees on how it works. It will include details of the payable period, how and when the payment will be done, employee benefits, etc. It is imperative to know the rules and regulations of taxation and labor laws to prepare a comprehensive and flawless policy. Hence, it is important to document the payroll processes for easy and transparent communication between the employer and the employees.

Payroll budget

There are several expenses like provident fund, employment taxes, insurance, Overtime pay, etc that come under payroll. It is essential to plan and budget to avoid any contingencies. This will help in tracking and controlling the expenses. The ultimate aim of any business is to increase the bottom line. Hence, budgeting will help in choosing the right payroll system for the business.  

Separate the Payroll expenses

It is wise and advisable to separate the payroll expenses into a different account. This will help in the budgeting process and track the expenses. This will help the business to stay liquid.

Track the work time

Keeping track of the employees’ work time is recommended for the easiness of payroll computing. This will help in increasing employee productivity and without any doubt, beneficial for the business, as well. Time tracking applications or software are available for this purpose. 

Integrate the payroll with HR and accounting system

Payroll is dependent on the accounting and the human resource departments of the business. The advantage of integrating payroll into these systems is that they get faster and accurate data. This enables timely payments which in turn will result in increased employee productivity.

Ensure adequate time for processing

To ensure timely completion of the process, a definite time should be set up. This will end the possibilities of errors and miscalculations. Additionally, this will give ample time to check on any misappropriations. 

Proper Employee classification

It is essential to classify or categorize the employees so that the calculation of taxes and benefits are performed accurately. A wrong categorization may result in an inaccurate calculation. This ultimately brings in penalties which will affect the profitability of the company. 

Fixed payroll Schedule

The account payables and account receivables are the lifelines of any business. There should be a balance between the two to ensure a healthy and steady cash flow. A consistent payroll schedule will help in staying on top of the matter. 

Transparency and accuracy 

Efficiency is directly proportional to transparency and accuracy. It is a well-known mantra but it should be strived for. Unless and otherwise it is made the top priority, there will be miscommunication between employer and employee. 

Direct transfer

The timely transfer of payments is a concern in payroll management. Delay in remuneration may result in dissatisfied employees.  To avoid this, it is best to opt for the direct transfer of payments by linking the accounts. The employment taxes can also be paid by linking the government accounts. This can avoid penalties due to delay. 

 Outsourcing the payroll service

Payroll processing is time-consuming and dependent on data from different departments. Errors are costly and will have a ripple effect. It is prudent to rely on trained professionals with a good history of work. The outsourcing will also ensure adherence to the law and timely completion.

Why Diligen?

The most valued attributes for providing quality payroll outsourcing service are work experience, expertise on the subject, and efficiency to ensure the desired outcome. These have been proven by the team of Diligen time and again. The integration of technology along with a result-oriented team guarantees a hassle-free experience. 

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