How a Payroll System Works

how a payroll system works in South Africa

If you have ever wondered how a payroll system works, this article will clarify it for you. Payroll is time-consuming, requires a lot of attention to detail, and can be quite tricky if one has a large number of employees in a company; however, it can also become repetitive and boring. When people become bored, they stop paying attention and start making mistakes, which is where payroll software comes in handy. It ensures more accuracy as the human element is removed in many of the tasks. If you have ever wondered how a payroll system works, this article will clarify it for you.

In this article, we will discuss how a payroll system works in the traditional sense, what the basics of payroll consist of, the steps involved in payroll, and the different payroll systems that are available for use.

The Basics of a Payroll System

Every payroll process consists of a few basic tasks. There are also ways in which to ensure that your payroll process is made to work faster, with more accuracy, and is making your life as a payroll administrator easier. Having a system and flow in place will help to ensure that you do not miss any vital steps required to perform a successful payroll run. A simple flow could consist of:

  • Determine your company’s payroll policy.
  • Collect and document all employees’ required information.
  • Implement direct deposit.
  • Ensure there is a time-tracking system in place.
  • Check the timesheets provided by employees.
  • Approve and then implement payroll.
  • Save and store your payroll records.

The 3 Stages of a Payroll System

There are typically three stages in which a payroll system can be sectioned and helps one refine the process laid out above.

  • Pre-Payroll: This stage is where one prepares for one’s payroll to roll out. Thus, one ensures there is a payroll policy in place, and that all the necessary employee information has been gathered and verified.
  • Actual Payroll: In this stage, all the required data (such as timesheets) are input into the system, and everything is once again checked and validated to ensure accuracy. The payroll itself is then processed, taxes and deductions are implemented, and the payroll is generated.
  • Post-Payroll: All required paperwork and payments are sent to the governmental agencies that require them (for example; tax documentation and payment will be sent to SARS). Records of the payroll process are created and filed away for safekeeping. Salaries are also paid out at this stage. Depending on the size of the company in question, one might have to report to a senior or another department to weigh up departmental and salary costs versus productivity.

Types of Payroll Systems

There are different payroll systems that a company can choose to implement, depending on their specific needs and requirements.

  • In-House Payroll Processing: This will typically be an option that small companies will opt for, and will be handled by a payroll administrator.
  • Outsourcing to a Bookkeeper: This option will usually be provided by a payroll service provider, who will take care of all payroll-related activities. This should ensure a high level of accuracy and be a great way to maintain compliance as they will be up to date with the latest laws and regulations.
  • Online Payroll Software: An option like this aims to improve accuracy and efficiency while reducing the cost of payroll.

PaySpace is a payroll company with a twist. We provide both payroll software and outsourcing possibilities, ensuring that you are supported in every aspect of your payroll process. To find out more about how PaySpace can assist you, contact our team.