5 steps for setting up your online payroll system

Processing payroll is a key responsibility for HR departments. From determining employee pay and calculating deductions to maintaining important records, payroll managers have to focus on accuracy to ensure compliance and keep employees satisfied. With online payroll systems rising in popularity, more and more organizations are adopting these options to make payroll processing simple and error-free.

If you are still processing payroll manually and setting up payroll online sounds like a herculean task, here are five steps to get started with your online payroll system:

1. Have the prerequisites ready

Before setting up payroll online, it's essential to prepare all the necessary information. If you are used to manual payroll processing, you might have all the prerequisites on hand already. If you are just getting started, you'll want to gather a few key details. For instance, if your business is operating from the USA, you'll have to get an employer identification number (EIN), which is a unique nine-digit number issued for businesses by the IRS to process payroll, pay taxes, and file tax returns. If your business operates from India, you'll need your PAN and TAN numbers. Based on the laws governing your region, you'll want to define your organization's payroll, leave, and attendance policies. You will also need to classify employees based on their employment type and finalize the pay rate for each category of employee.

2. Choose an online payroll system

As there are so many online payroll systems on the market today, it's important to choose one that is consistent with your organization's needs and your region's payroll laws. Ideally, the payroll system you choose should be able to automate calculations, maintain compliance with payroll laws, enable employees to complete payroll-related activities, and maintain payroll records. As payroll processing often involves sensitive data, your online system should have strong data privacy and security features. It's best to find a user-friendly option that integrates with your existing HR and accounting systems, if relevant. This will allow you to access all your data from a single, centralized system. You'll likely need to coordinate with your IT and finance teams to finalize a budget for the new system.

3. Set up your system with the right information

Once you purchase the system, make sure payroll is calculated without any errors with an effective setup process. First, you'll want to input employee information including names, contact details, social security numbers, tax forms, and salary details. Be sure to double-check this data to ensure accuracy. You'll also have to enter tax information and the salary breakup. Additionally, it's essential to define the pay schedule and mode of salary transfer. This way, the system will automatically calculate payroll and transfer the salary directly into employee accounts while the online transfer option is enabled. If employees are to be paid based on the number of hours they work, it's best to select a system that is integrated with an online time clocking solution.

4. Run payroll

After all the information is set up correctly in the system, we recommend running a final check to avoid any possible errors. Review your organization's pay rate, attendance and overtime data, tax deduction information, and voluntary deduction figures. Similarly, you'll want to ensure that your online payroll system is up to date with applicable laws. Once everything is set and the final net pay is calculated, you can run the payroll. Your employees can download their payslips themselves through the self-service portal.

5. Monitor the records

Once payroll processing is complete, check that records like the W-4 form, gross pay details, attendance data, overtime data, reimbursement information, and payslips are documented in your system. If you've selected a cloud-based system, you can say goodbye to compliance issues and be audit-ready all the time, as well as enable your team to access their records from anywhere.

Setting up payroll online

Moving payroll online simplifies payroll processing for both you and your employees. Because everything is automated, you'll never find yourself correcting or repeating mundane processes.

Zoho People, our HRMS, integrates seamlessly with Zoho Payroll to automate payroll calculations. With this integration, you can instantly gather time, attendance, and leave data required for payroll calculation. Learn how Zoho People's integration with Zoho Payroll can be beneficial to your organization.

Also Read: Can you do payroll yourself?