The importance of payroll in an organisation

08 December, 2015
By G-Team in Payroll
The importance of payroll in an organisation

Payroll is an integral part of all organisations. The payroll department is not only responsible for employees’ salary compensation, but it also plays a vital role in protecting the company’s reputation by ensuring compliance with various legislations. Too often, many view the payroll as merely a processing function. They fail to recognise the importance of payroll and the mammoth effect it has on businesses. Payroll affects every aspect of the organisation, from the reputation of the company right down to the morale of its employees.

Morale of Employees

A critical aspect of payroll is its impact on the morale of the employees. Employees need to feel assured that they can be paid on a consistent and timely basis. A late and inaccurate payroll might cause employees to question the financial stability of the organisation. This might compromise on the work climate within the organisation, resulting in underperformance and ignorant behaviour towards the organisation. Given that employees form the base in all organisations, the importance of a reliable and accurate payroll cannot be overstated.

Compensation Package

Another aspect that payroll plays is that it allows an employee to feel his net worth within the organisation. Payroll is not limited to simply the dollar and cents of an employee’s salary. An employee’s total compensation such as salary, bonuses and benefits are incorporated into payroll. Based on annual performance evaluations, employees are typically rewarded with a salary increase or a fat bonus, or ideally, both. This in turn, might boost an employee’s performance and which translates to a positive effect on the organisation.

Uphold Company’s Reputation

In addition to the financial obligations that an organisation has towards its employees, the organisation has to ensure that its payroll activities adhere to the country's tax obligations and comply with employment legislations. The efficiency of meeting tax obligations on time and upholding of legislative laws can further establish the organisation's reputation as a stable employer. With this value-added branding, it will ultimately attract and retain the right pool of talent to the organisation.

Re-allocation of Resources

With all the paperwork and excel calculations that comes synonymously with payroll, it can be an extremely time-consuming and manual job. Furthermore, as payroll has to be performed regularly every month, additional resources need to be employed to ensure the accuracy and precision of payroll calculations.  As such, most organisation these days tackle this issue by engaging a reliable payroll software system. A payroll software system would allow a more comprehensive data management and provides organisations the option to generate customised reports. In addition, payroll software systems are typically up-to-date with the latest legislative changes and thus, organisations need not worry about an overhaul on their current payroll system just to keep up with recent legislative changes. As payroll is now automated, it allows organisations to save on costs in the long run. Furthermore, it frees up valuable resources for the organisation to focus on other business areas.

The payroll department is the organisation's shop window. One can get a good sense of the company's culture, branding and financial stability simply by looking at its payroll processes. An efficient payroll department reflects the organisation's commitment to its employees and its reputation. Hence, it is important to ensure the accuracy and timeliness of payroll and not simply overlook this key department.