Everything You Need To Know About Organising Your Payroll System

Banking And Finance

Everything You Need To Know About Organising Your Payroll System

When running a company with employees, payroll is the term used for payment of employees from the employer.

The term payroll can also refer to the businesses financial records the company holds on employees, including taxes. 

What is payroll?

Payroll includes:

  • Distributing money by direct deposit or cheques
  • Recording those payments
  • Paying taxes
  • End of year assessment of wages

In the UK, payroll taw works through a PAYE, pay as you earn system. As an employer, it is your duty to ensure that the correct taxes are paid. 

In the US, the employee will give a W-4 form to the employer, which states how much the employer will hold for federal and state taxes. 

How do you organise your payroll?

The better your payroll is organised, the less time it will take. 

Paying your employees

Distinguishing between salary and wages/hourly pay is essential. 

A salary is a fixed amount that is paid at regular intervals. Salaries can be directly deposited into your employees' chosen account. 

Wages or hourly pay can change based on how much your employee worked. 

Classification of employees

The classification of employees is essential for making the correct payments. There are many ways in which a person can be classified. 

  • Full-time employees usually work at least 40 hours; these come in temporary and permanent.
  • Part-time employees work less than 40 hours but usually more than 16. 
  • Temporary staff are employed up to 180 days in most cases.
  • Self-employed staff take care of their taxes and are not on a permanent contract with the company.

Other classifications are dependent on the business type and country you reside. 

Each of these classifications will have a correlating code that allows them to be placed and organised within the payroll system. 


Choosing payroll software that works for you and your company is vital. 

Here are considerations when choosing the right payroll software for your business needs: 

  • Staffing - You will likely need a person to manage the payroll system. Collecting the employee data, employee information, maintaining the records and issuing the payment. 
  • Cost - The time you spend managing the payroll will increase as your business expands. Understanding your budget and requirements will allow you to narrow your payroll software options down. 
  • Security - Ensure that the software that you choose has the highest level of protection. 
  • Reporting - Having easy to understand and access reporting systems, as well as custom reporting, will give you the information you need for taxes. 


Taking care to organise your payroll well will make it all run smoothly. 

Creating a payroll calendar is the starting point; this gives employees an understanding of when they will be paid. 

Keeping your payroll staff trained in the software you use and best practice will give your team the tools to work to their best ability. 

Remain aware of all of the tax requirements for your staff and your business. If your staff relocate, their tax obligations may change. 

Automation of the payroll process. When doing payroll manually, you are susceptible to mistakes, data loss, and losing a lot of time. This is why software is essential. 

Time tracking for employees that are on a per-hour or wage is essential. Automated time trackers will reduce the number of human error possibilities. This step will increase the accuracy of your payroll reports. 

Keep transparency in your payroll process, including:

  • How employees are classified
  • How salaries are determined
  • The process
  • The responsibilities of the employee and the employer

Have all of these and more in a policy that employees can access. 


Take time to document your payroll process, and improve it. 

Analysing and auditing your payroll will highlight all of the areas that could be improved. 

Weaknesses within your payroll will impact the efficiency and drive up the cost of the process. 

Doing a payroll audit will allow you to develop a payroll process that benefits your business and employees. 

Your payroll is an essential part of your business. Your employees rely on your company to pay them the correct amount on time, without error. 

Payroll is a vital part of your business and one you can’t afford to get wrong. 

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