How Outsourced Payroll Services Work

How have you been handling payroll in your company? Do you do it in-house or do you outsource the payroll service? Payroll processing is no doubt a tedious and costly task that gives most employers constant headaches, but it doesn’t always have to be this stressful.

How you ask? By outsourcing the payroll service. When it comes to the outsourcing industry, there are several other benefits than the two most talked about aspects- saving time and money. Organizations need to consider outsourcing payroll services if they are to fully focus on their key goals and meet their bottom-line.

Still not convinced? Here is how outsourced payroll services work

Company & Employee Registration

This should be the first step in the payroll process and should be done with the relevant tax and statutory authorities. These identifications will be used by the government to track your businesses payroll taxes and ensure you’re meeting the set requirements.

Collecting relevant employee tax information

Before you start processing payroll, employees need to fill out various tax forms so you can account for allowances and other tax details.

Choosing a payroll schedule

Once you have the relevant tax and legal information to set up payroll services, you can choose a schedule that works best for your business. There are four main schedules: monthly, semi-monthly, biweekly and weekly. It’s important to understand a full breakdown of each plan before deciding which is best for your business. Once you choose a schedule, set up a calendar with paydays and make note of days where you’ll have to process payroll for your employees to get their money on that defined day.

Calculating Gross Pay

An employee’s gross pay is the sum of the number of hours an employee works in a given pay period multiplied by their hourly rate. This is done by calculating the number of hours an employee has worked in a given pay period, and take note of overtime hours. All this is also dependant on how your company works.

Determining deductions

This information is gathered from tax forms, state requirements, insurance requirements and benefits requirements. Once you have all these, you will be able to determine each employee’s deductions.

Calculating net pay

This is a crucial step in payroll services. The employee’s gross pay is subtracted from their deductions. What remains is the employee’s net pay, or take home 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.

Keeping payroll records

As part of the payroll process, it’s important to keep records of your transactions for tax and compliance purposes. If an employee disputes payment, or KRA needs some kind of documentation down the line, you need to have records at the ready.

In Summary,

Most employers will want to keep the payroll services as an in-house task because the overall assumption is that it is cheap. Outsourcing payroll services will save you time and money and make the task less draining or stressful.

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