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Employees are the strongest pillars of any successful business. Organizations take that extra care to ensure that the employee remains happy and content. Along with running various business functions smoothly, it becomes equally important for the employer to keep the employee happy.

The most important factor that keeps your employee happy is by managing their payroll effectively. Ensuring that the employees get paid on a timely basis as per the payroll schedule without errors, is a task in itself.

The basic task of the payroll system is to keep a basic record of salary given to your employees intact. There is much more to managing a payroll system which includes managing the time and attendance, benefits, deductions, compliances, to name a few. A business needs to follow a comprehensive system of managing the same for error-free timely processing of salaries and the government as per the compliance requirement.

Listed below are some of the common types of payroll systems with their benefits.

  • Internally Managed Payroll Systems: Organizations with a lesser number of employees can manage their payroll internally. Managing the data of lesser employees manually is easier and processing their payroll without major discrepancies is manageable. Fewer resources with the knowledge of payroll processing, various laws, and tax applicability, can be hired to do the task.

    The person/team responsible for processing the payroll must be informed of the employee-related changes like work hours, new hires, exits on a timely basis. They must also stay updated on the tax filing laws, requirements, schedules, and procedures to be followed. An internally managed payroll system, surely, reduces the security risk of the financial data.

  • Professionally Managed Payroll Systems: In a small setup, if you feel that you lack the expertise required to manage the payroll system, you can hire external resources who are certified public accountants (CPA) or a bookkeeper to manage the intricacies of your payroll. They generally keep your tax records and prepare payrolls but may not facilitate the transactions. Once the payroll is processed by them, you can get the transactions done by your own employee responsible for providing the inputs for payroll processing. Hiring and contractual experts also manage and entertain the last-minute changes and updates to prevent processing errors.

    In a nutshell, these experts will facilitate you to process the payroll but actual transactions to the employees and the government filings will have to be done by you.

  • Agencies Managed Payroll Systems: Outsourcing the complete payroll process to an external agency helps in keeping you compliant all the time. Agencies normally get the work done by experts on payroll tax and regulatory requirements. They even take care of the timely filing of the taxes with the government agencies. Just keeping an eye on the same will keep you compliant and hassle-free from day-to-day activities. They even help in deposits, deductions, and timely disbursal of the payments thus reducing the penalties.
  • Software Managed Payroll Systems: Automating the complete payroll program is the most efficient way of managing the payroll without errors. This is very effective even in the cases where employee counts are high and where the companies follow different pay structures. Payroll software is a user-friendly program that compiles all the requirements at the backend making the complete process simpler. With few basic inputs, the payroll can be processed efficiently in just a few clicks without necessarily having expert knowledge. This also helps to provide an interface to the employees to check their records, details, and transactions at their convenience and from any device.


As payroll is critical to every organization, choosing the method of processing the same keeping the employee satisfaction in consideration, it is advised to choose the right kind of system to manage your payroll.