For most businesses cash flow crises means possible failure. Running payroll accounts that are efficient can have a huge impact on the firm’s cash flow. Creating a payroll is one of the most crucial parts yet complex business management duty. The complexity is brought by the many considerations involved in its development like taxes. Additionally, the lack of proper payroll management in the first year can mean failure in the second year.
That said, efficient payroll management can be attained by some preparation and good software. The combination of these two means automation for the payroll system making it easier to manage. This article proposes ways of managing the payroll in the best way possible.
Salary and Individual Income Tax
Salary is a fixed perpetual expense to any firm with employees on assignment. The salaries depending on the company can annual or divided into smaller divisions. Some jobs are paid based on the working hours and agreed wage rate. For better management of this component of a payroll, you need to keep employee record. Such records include personal information about the employees, overtime and vacation time. For many firms, salary payments are generally easier that paying wages. The reason for this is because to pay wages correctly the records are crucial. The only way to ease the workload for this section is making sure every employee is salaried. The next step is to deal with the taxes which can be individual, state or regional. Under the Canadian regulations any employer should expect to pay:
1. Income tax
2. Canada Pension Plan (CPP)
3. Employment Insurance (EI)
Most of these payments can be easily calculated by the Canadian online revenue payroll calculator. For those who cannot there is a 5 step plan which is:
• Deducting income tax after adding the benefits
• Deducting Canada Pension Plan (CPP)
• Employment Insurance (EI)
• Submitting the deductions and employer contributions
• Complete returns forms.
Employer and Employee’s Social Security
For those working under Canada regulations, access to government services and benefits is attained by having a social security number. The services include employment insurance and Canada pension plan. By law, employees are required to submit their social security to their employers. The first responsibility of an employer when dealing with social security is maintaining employee privacy and confidentiality. The best way to deal with this part is by first you request the documents. After they submit, it is advisable that you go through the documents to verify their authenticity. Additionally, for the foreign employees make sure they are still legal and allowed to work in Canada. In the case of renewal of immigration papers for foreigners make sure you verify the documents thoroughly. Lastly, it is important to report suspicion of fraudulent use of social security numbers.
Benefits of an efficient payroll system are numerous. First are the ease and accuracy in salary calculations. Second is the ability to manage future expectations through forecasting. Another is the accurate tax management. All these benefits are crucial for business success. It is advisable to invest in a good system as running an efficient payroll is possible.
About the Author: Gerald Hunt
After graduating from the University of Calgary with a Bachelor of Science degree in Computer Science, Gerald joined KPMG (Formerly Thorne Riddell) as a Computer Accounting Customer Service representative. In this position, Gerald installed accounting systems in over 200 different small to medium sized companies over a 6-year span. In 1989, Gerald left KPMG to continue working with small business clients in his own corporation, installing computer accounting systems. While in this role, the DeVry Institute of Technology in Calgary engaged him to teach various courses. In time, Gerald moved up through the ranks of DeVry until he attained the position of Director of Finance for the Calgary Campus. He also acquired his Masters of Business Administration from City University of Seattle, Washington in 2001. Gerald’s career has always been focused on small business, accounting, and education. Need accounting help? Visit Padgett Business Services, and book a free no-obligation one-hour consultation.