What is payroll in accounting?Payroll is the process of collecting, classifying, and paying wages to employees and other workers, typically by an employer or on behalf of an employer. It also includes benefits, payroll taxes, and other payments. Payroll is a system by which a business keeps track of its employees’ wages, taxes, and other deductions. It typically allows a company to track the pay and employment status of employees and tax withholding on certain payroll deductions.
types of payrollThere are six significant types of payroll that companies opt for based on business needs. They are as follows:
- Weekly Payroll
- Monthly Payroll
- Two-Weekly Payroll
- Biweekly Payroll
- Semimonthly Payroll
- Annual Payroll
pros and cons of payroll outsourcingDepending on the size and type of an organization, there are several benefits and drawbacks of using a payroll service or outsourcing it. As a business, it is necessary to understand the pros and cons of each one. Here are some crucial points that you need to know before outsourcing or owning a payroll system:
- Outsourcing payroll saves a significant business time it can use for core operation
- You can minimize the errors by hiring a highly skilled and experienced team
- Reputed accounting firms own state-of-the-art technologies that provide better security
- Hiring payroll services solves your worries about changing compliance and government regulations
- Outsourcing accounting & payroll services help you to integrate & synchronize different departments
- Your outsourced team might not be available sometimes if you need bills instantly
- Outsourcing accounting and payroll services involve sharing confidential & sensitive information
- Finding a suitable payroll team might not be easy all the time
What does payroll look like?Payroll is the process through which employers authorize and approve their employees’ expenses, wages, or benefits. Since it is a legal function, an employer has to manage the technicalities and audit the entire payroll process. Employees can choose to become independent contractors and not be treated as employees for payroll purposes if they are sole proprietorships, partnerships, LLCs, or sole proprietorships with more than five employees. Payroll services typically include:
- Contacting the employee’s bank for direct deposit of monthly payments.
- Processing all necessary tax returns.
- Issuing W-2 forms for every month worked in a tax year.
- Automating compliance with state and federal laws that govern payroll practices.