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Characteristics of the Payroll Systems

Updated on February 1, 2014

What are key characteristics of payroll system?

A payroll system that is computer driven offers to manage and automate the functions of payroll systems in a particular organization. Before emergency of the computer systems, most organizations calculated the payroll manually. The use of the computer in payroll calculation has de it easier for the management to make and retain the information relating to payroll. Among the main characteristics of payroll systems, include the heightened security with regard to storage of sensitive company information and automatic calculations in employee payments.

Automatic Calculation and accuracy

The payroll system that is computerized has a capability of computing wages automatically of which an employee has worked when data is coded into the computer. Further, the computer is able to automatically compute the employee’s time, absences, sick days, vacations personal hours and tardiness. Moreover, these systems are able to change in premiums and the amount of overtime worked. Commissions and bonuses can also be automatically set and disbursed to employee’s paychecks on a schedule, which the administrator has set.

An organization’s payroll system ought to effectively accommodate all its workers and the hours worked by each in an accurate manner. In essence, a good pay roll systems is the once which ensures that the hours worked by each employee in the firm are accurately kept. Although human is to err, an automated system minimizes the potential of such error as the only factor employed is the reporting and departure of these employees. In the case when the time clock malfunctions or when certain employees forget to go out for lunch, the correction can easily be made by the administrator or the accountant using the payroll system. Therefore, the payroll system is the third party which could effectively and accurately keep and record the hours for outsourcing the payroll functions.


A payroll systems includes addresses, names, social security numbers and other confidential information. A computerized payroll systems can be effective in securing the confidential information regarding an organizational employees. If such information gets into wrong hands, it may result into problems not only to employees but also for an organization. A computerized payroll system makes it easy for the management and administrators to control the access of such information and setting of different users. Such a system would also offer an audit trail where all user transactions, and the dates for log in are recorded. Security is therefore, another feature of a payroll system.


Payroll systems are able to generate different types of reports. Such reports may include information on tax, employee pay stubs, information regarding hiring and termination , check printing and register. Further, such a system may offer other special reports, which could be used by an administrator in cost accounting and generating reports on tax liability. The systems facilitate generation of reports using a variety of criteria as most of these systems contain various reporting capabilities.

Why are payroll systems very important in business process

The law in most nations of the world requires employers to pay workers for the rendered services. The process of this payment is therefore, made possible through the payment system. Many reasons exist on the necessity of the payroll systems for both employees and employers. This part discusses a few of these reasons.

Saving Time

Processing of payrolls is in most cases a detailed and time-consuming endeavor. There are organizations that pay on a weekly basis, others bi -weekly while others pay on a monthly basis. Before printing checks, the deductions, benefits and taxes should be calculated. The hourly wages should also be incorporated in the system. The kind of payroll system used, whether external, manual or computerized ought to be designed in such a way that the amount of time in calculating these aspects is significantly reduced. For instance, an accountant can use the payroll system in computation and calculations of these aspects. This would significantly save the employer from doing much work and enable him or her to devote the saved time in doing other works.

Allowing Structure

The payroll system facilitates the establishment of a payroll environment that is structured. Various documents with regard to payroll such as check information and payroll registers need to be filled for processing of each pay date. A payroll system therefore, enables a filling system that is organized and structured. Computer files eliminate unnecessary filling and paperwork. Further, the payroll system will store the confidential employee information such as address, birth date, social security number and so on and ensuring its security.

Tax Deductions

It is a requirement that all employees and employers to pay taxes to the government or related authorities. These taxes are obtained from employee’s check every payday. On her part, the employer is mandated to deposit her taxes to the government. The payment system ensures that the amount of tax required by the government from both the employee and employer are duly paid. Most organizations would use payroll software or outsource the payroll system in deduction of these taxes in order to reduce the necessity of having to compute these taxes manually and therefore reducing the risk of errors. In essence, a payroll system ensures that apart from employee’s taxes being paid, the employers annual or quarterly taxes are also duly paid.

Tracking Benefits

There are employees who would choose to be involved their organization’s health, pension or other benefits. The payroll systems would therefore be of essence in the sense that employees would be able to receive their benefits in relation to their costs. The payroll systems will certainly track the benefits and their related costs as the long as the amount to be deducted after each pay period is entered into, they are automatically deducted by the system in every pay cycle. The accountant in this case would only need to revisit the record if there is a change concerning such benefits where he or she is required to change the figures manually.


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