The survival of any business is hinged on the efficiency and effectiveness of all functional areas of the business.
The Human Resource is one of the most important of all the functional areas as it manages the welfare of the employees including their payroll processing and management. The responsibilities of payroll management begin as soon as the first employee is hired. This is not as basic as it might seem, payroll management involves a lot of technicalities especially as the size of the workforce increases. The lack of knowledge about the complexities associated with payroll management can pose a great risk to the business. As a business owner, these are a few areas to focus on:
There are different categories of employees (temporary, casual, etc.) as defined by The Pension Act and The Industrial Training Funds (ITF) Acts. A number of businesses assume that certain categories of employees are not subject to payroll statutory deductions. These Acts do not exclude any category of employees from payroll taxes. Hence, as a business owner, you should ensure all employee payroll taxes are captured as a failure to comply may lead to a fine.
Identify taxable income
Section 3 (1) b of the PITA 2011, as amended, defines Income subject to tax as “any salary, wage, fee, allowance or other gain or profit from employment including compensations, bonuses, premiums, benefits or other perquisites allowed, given or granted”. Going by the provisions of the law, it is safe to conclude that all allowances/income that is inputted in the payroll is taxable (including overtime, bonuses and leave allowance) excluding expense reimbursement. As a business owner, you should stay updated on the regulatory provisions and ensure total compliance.
Adequate business records help will help you manage and track all necessary business activities and aid good business decision. Accurate payroll records help to minimize error and make for effective monitoring. Generally, payroll management software and tools make business and financial records easier to manage.
Outsourcing of payroll service is a great idea for businesses, it helps to save time, reduce administrative costs, and allow the business to focus on its core operations. However, outsourcing of payroll management does not entirely absolve the business owner of its responsibility for all payroll matters especially payroll taxes. The business should be aware of all payroll related statutory deductions for compliance and deadlines for remittance.
Payroll management is an integral part of any business regardless of staff strength. It is almost impossible to run a successful business without proper coordination of payroll matters. Adequate attention should be given to payroll tax implications as they are capable of generating external and internal reactions. As a business owner, you will minimize your risk exposure if you make the effort to understand the technicalities and complexity associated with payroll management.