In payroll accounting, a payroll consists of the details about an employee’s salary and all the various deductions taken from this salary. In payroll management, a payroll is an official record of all the individuals of a corporation who are entitled to get various benefits and other compensations as per the rules of the employer. Every employee has a different schedule of work and different rates of pay, and thus it becomes necessary to keep a record of all these things. This record is known as the payroll record or the payroll accounting file. If there is an error in any of the details regarding an employee, this will be reflected in the payroll accounting file and you will end up with a wrong picture of his salary and working hours.
Every company has their own set of rules regarding their employees and their working hours and hence they have to allot different rates of pay for them. The government, on the other hand, has fixed legislations regarding the employees and their rights to work, their rights to be paid for their work and other such aspects. All such legislations are implemented by the employers in the payrolls of their companies. Now, there are certain rules which every employee must follow and hence it is necessary that all the details of the same have to be filled up properly in the payrolls of the company. In order to ensure accuracy, the employer needs to maintain a track record of all the transactions concerning all the employees.
Payroll accounting is absolutely necessary for every organization whether big or small as it is concerned with the proper tracking and recording of all the transactions in the payrolls. Every employee in the payroll has to be paid, and hence it is essential that he is given a precise account of his salary, as well as all the deductions taken from it, in the form of deductions or the salary advance tax. This also includes any deductions made by the employer. It is essential that all these things are recorded in the payrolls of the organization. If there is any discrepancy in these records, then it may lead to some embarrassing situations, especially in case of tax.
All the employees in the payroll must pay the income taxes of their respective governments, and so this aspect of payrolls becomes all the more important. There are certain principles which are applied when it comes to paying taxes on the paychecks. If the employee is not able to pay all the required taxes in time, then all the said deductions will be added up, and will become the taxable income of the employee.
When the employee inputs his salary amount in the payroll register, he has to go through a number of formalities, before the amount gets credited to his account. There are many calculations which have to be made in order to get the final result. These calculations are done by the government and are verified by the bank. After getting the salaries, the deductions are deducted automatically from the salary by the employer, and thus it is evident that payroll processing is a very complex affair, which requires great care.
It is only because of the above-mentioned complexities that most companies do not opt for the payroll software. This does not mean that payroll software is not used at all. There are many companies who still run payroll process manually. In these cases, there is need to make the necessary amendments in the rules of the company, which will help in reducing manual processing. Thus, the payroll software can come as a boon to these companies to minimize errors, increase efficiency, and maximize pay period.