Objectives of a Payroll System

by George Lawrence J.D.; Updated September 26, 2017

Business owners must be meticulous with every aspect of their endeavor. Sloppy or lazy entrepreneurs lose time and money sorting through loose ends; further, if the business records and accounting systems are not accurate, the owner could be charged with violating state and federal labor laws. One such system that needs to be accurate is the payroll system.

Generate Accurate Year-to-Date Reports for Employee Income

A payroll system must be able to keep and generate accurate reports on employee income. From the business owner’s standpoint, being able to generate year-to-date income reports makes filing business taxes a little easier: the amount used to calculate tax deductions for business expenses regarding employees (specifically, the employee’s income) can be readily accessible. From an employee’s point of view, being able to ask the employer for a record of his income could be critical for securing loans or state assistance (such as disability or unemployment benefits).

Generate Paychecks and Pay Stubs

An equally important objective of any payroll system is to generate paychecks and pay stubs. Computerizing this task saves managers and business owners time and money; rather than reviewing time cards manually and calculating a check amount based on the hours worked, the payroll system should be designed to automatically calculate these figures. Employees appreciate a timely payroll system as well: it reduces anxiety about receiving checks on time and any anxiety about receiving a check for the wrong amount.

Help Owners Comply with Labor Laws

A payroll system must make complying with state and federal labor laws easier, while at the same time helping the owner reduce overhead. For example, federal law mandates that employees be paid overtime if they work over 40 hours in one work week.

A payroll system must automatically factor in the overtime pay. This helps employers stay within the law when it comes time to pay overtime. Additionally, since an employer can use the system to check the number of hours an employee works, the employer can shift schedules to avoid paying additional overtime (thereby helping the employer keep costs lower).

Further, a payroll system should be able to print tax forms and other state-required figures (such as FICA amounts) to make complying with labor laws easier.

About the Author

Based in Traverse City, Mich., George Lawrence has been writing professionally since 2009. His work primarily appears on various websites. An avid outdoorsman, Lawrence holds Bachelor of Arts degrees in both criminal justice and English from Michigan State University, as well as a Juris Doctor from the Thomas M. Cooley Law School, where he graduated with honors.