How to process employee gross salary for small business

Payroll process will be handle by company depends on how the payroll will be calculate. The payroll usually be calculated by the expert which is accountant who usually the best choice of running the payroll management.

If you’re interested in processing payroll manually and saving cost for each month in payroll solution fees, there are a few steps you need to take. Keep in mind that, depending on the size of your business, this can be a very complicated process.

Step 1: Record Employee Information

Before start processing payroll, you must have your employee relevant information. Let you employee fill in the form which necessary for future used regarding personal details in order to make it more easier. The information need to be record so that accountant can easily referred when needed.

Step 2: Choose a payroll schedule

Once you have the relevant information, plan a schedule that can works best for your business. There are four main schedules which are monthly, semi-monthly, biweekly and weekly. Each plan is important to be understand in order to decide the best time for company payroll process every month. Thinks of pros and cons for each plan in order to have a good schedule that suits for your company business.

Once you choose a schedule, make a notes on your company calendar so you can always alert to set up a payroll in correct time. Please make sure you have noted enough time to calculate the payroll in order to avoid any problem on the defined payday. Good planning for payroll schedule is important to employee so that they can get the salary on time every month as promised.

Step 3: Calculate Salary Based on Gross Salary

After you already make sure to settle above steps, you can now start doing your payroll. In order to done this step, you should know your employee gross pay for each employee. Gross salary is the amount of money your employees receive before any taxes and deductions are taken out.

Each of employee will surely have different amount of gross salary depending on their position or education level. This will really let you more concern and alert with all information record to avoid any mistake occurs at this steps.

Example for Formula Calculate Gross Salary per month:

(Monthly Salary x Number of Days employed in the month)/ Number of days in the respective month.

Step 4: Clarify Employee Deductions

Generally, an employer is required to make the following deductions from an employee’s salary (irrespective of whether they are an EA Employee or a Non-EA Employee):

Employees Provident Fund (EPF)
Social Security Organization (Socso)
Employment Insurance System (EIS)
Professional Insurance
Human Resource Development Fund

In addition to making these deductions, an employer must also make the employer’s contributions to their employee’s EPF and SOCSO accounts, so don’t forget to factor these additional “costs” into your payroll and headcount budget.

Step 5: Calculate net pay and pay your employees

For a company, net income is the residual amount of earnings after all expenses have been deducted from sales. In short, gross income is an intermediate earnings figure before all expenses are included, and net income is the final amount of profit or loss after all expenses are included.

Take each employee’s gross pay and subtract their deductions from this amount. What’s leftover is the employee’s net pay. This is what you’ll have to pay out to each employee via direct deposit or paper check, depending on what your workers prefer and what you can provide. The deductions you’ll have to hold and pay with your payroll taxes each month or quarter, depending on the schedule you establish.

Once you’ve established each employee’s net pay, you can pay out your workers on their scheduled payday.

Step 6: Keep payroll records and adjust to mistakes

It is important to record all your transaction for tax and any compliance along you processing the payroll for your company. There will be a time where your company will be audited in future to clarify your income and to make your financial be calculated in correct ways follows laws. As you process payroll, it’s important to keep records of your transactions for tax and compliance purposes. Others than that, some of your employee will facing any unnecessary things regarding salary, so it is very important to keep your transaction details for resolve any issue arise in future.

Step 7: Other considerations

Keep in mind that you have to file your business’s taxes on a quarterly and annual basis. It’s important to consult with an accountant to understand how your payroll taxes fit into this aspect of your operations. It’s also important to remember that you’ll have to report any new hires you make. Working with a payroll solution or an accountant means that this usually isn’t your responsibility.

5. Follow An Update of Payroll Legislation

Due to the changing of tax regulation it surely may affect on how you need to run your payroll, so it can follow along with the new laws. You need to always keep on update with new changes to have a correct information for making the payroll. You can have some some advice from trustworthy sources in just to make sure the new or changes information receive is true.

6. Pay for Payroll Software Training

Send your payroll teams for outsource training in order to have more efficient and productive in payroll management. If you use payroll software, there will be a training provided in order to cope with the payroll system and can save time while handling and understanding the payroll software.

The training usually can be held as online courses or face to face training which is aim to help increase the knowledge on how to use the payroll system.