Every employee has his/her right to expect compensation after service delivery. In most cases, this compensation may come in as wages or salaried earnings. However, the process doesn’t end here.

Employers are also required to file employment taxes to the government of the state. This is only achievable with a proper payroll management system.

In this post, we’d walk you through everything you need to know about payroll management systems; what they are, and how to keep an organized and efficient payroll.

Don’t stop reading.

First, What’s A Payroll?

In plain terms, a payroll is a list comprising the names of every employee in an organization and the salaries they receive. This document helps to keep track of the total sum of money paid to employees and taxes paid to the government. The payroll is a document necessary for the proper management of remunerations. Furthermore, it helps in the generation of other employee-related documents as required by law. It also provides a detailed summary of all funds paid by a company to her staff within a specific time frame.

However, keeping a payroll may not be as easy as it sounds, especially for organizations with a large number of employees.

If you’re in these shoes, you’re in the right spot.

The key to keeping an efficient payroll is simple: Use an efficient payroll management system. This way, all your employee details, financial records, and monthly deductions are all in one place. You can also read our other article on Expatriate Immigration.

What’s A Payroll management system?

A payroll management system is a systematic way by which employers pay the wages of their employees, remit employment taxes to the government and keep a record of cash outflow. It also involves the calculation and management of other financial remuneration such as deductions, paid leaves, and bonuses.

Ultimately, it is an efficient way of keeping your payroll.

The system works by keeping a list of all the employees in the firm and a record of the total amount of salaries or wages they receive from the organization. The payroll management system also effects a continuous review and update of the payroll database.

This way, you’re certain that every employee is captured, raises are well documented, and ex-workers are removed from the system. Furthermore, an effective payroll management system helps companies plan for and pay wages in due time, making the overall business more money-efficient. You can also read our other article on employment management in Africa and market entry solution and strategies.

How Important Is A Payroll Management System?

In addition to the benefits discussed earlier, here’s why you should consider a payroll management system:

  • Timely payment of wages and salaries
  • Proper record of employee remuneration status
  • Compliance with financial regulation
  • Time efficiency
  • Ease of access for payment
  • Improved financial management

Now, let’s consider the actual process of payroll management.

Payroll Management Process

The payroll management process is the activities involved in managing a payroll system. It is a means to achieving a good and efficient payroll management system. This process involves stepwise series of actions that result in proper record and management of employees’ details and salaries.

These details include;

  • Track hours
  • Leave
  • Bonuses
  • Taxes
  • Deductions

Nevertheless, it is important to note that the payroll management process must follow the requirements stipulated by the law to avoid breaching financial rules.

Stages of Payroll Management

1. Pre-payroll

This is the first stage of payroll management.

It involves gathering all the necessary data for making the payroll. This data may vary across organizations depending on company policies and regulatory laws.

They include:

  • Hours worked
  • Exception time such as vacation, sick time
  • Employee adjustments, such as new hires, separations, salary changes
  • Benefit deductions
  • Tax withholdings. This information is then verified and used to process payroll.

Once this stage is completed, the information collected is verified and utilized in payroll processing.

2. Payroll process

This involves the use of the verified data to make a list of employees and make calculations. In this stage, the total gross pay of each employee earned during the pay period is calculated. Then the withheld taxes and deductions are removed to make up the net wage.

Important activities in the payroll process include;

  • Calculation of employee wages
  • Calculation of taxes
  • Voluntary deductions
  • Mandatory deductions
  • Calculation of employee net wages

In the salary system, the gross pay is calculated by dividing the annual salary by the number of the pay period in the calendar year. On the other hand, the gross pay of employees who receive wages is calculated by logging the number of work hours per day and multiplying it by the wages per hour.

3. Making deductions

The next step in payroll management involves deductions.

a. Taxes

Federal, state, and local taxes are calculated and deducted from the employees’ total taxable wages/salary.  The exact amounts are based on current tax rates.

Payroll Management Process

b. Voluntary Deductions

These could be retirement plan contributions, insurance premiums, or union dues. In most cases, a prior agreement between the employee and the employer is reached before these voluntary deductions can be made.

c. Mandatory Deductions

On the other hand, mandatory deductions are made based on the court or government orders. This may be state tax levies or child support.

4. Post-payroll

All payments are made in this phase. Payments due to the government are remitted through the appropriate channel by the specified deadlines. The employees’ net salary is also paid at the appropriate time.

Other Functions of the Payroll Management System

1. Compliance with payroll recordkeeping requirements

A payroll management system helps in keeping necessary record keeping parameters such as;

  • Name and occupation
  • Address
  • Social Security Number
  • Payment basis
  • Gross wages
  • Payroll deductions
  • Allowances claimed
  • Net wages
  • Date of each payment.
  • Taxes withheld
  • Withholding certificates

2. Methods of Payroll Management

There are three major ways to achieve an efficient payroll management system. These include;

3. Manual payroll management

This involves the manual management of payroll through the use of spreadsheets. This method allows for manual input of data and calculations. It is cost-effective and particularly useful for organizations with a limited amount of employees.

However, the drawback of this method is that there is a high risk of making errors and losing precious work time. Employers can rely on it to calculate gross wages, deductions, and net pay accurately while allowing them to maintain some control over the process.

4. Outsourcing

Instead of managing the payroll system, a company can outsource to a third party. The company compiles and sends out an updated payment schedule to the third-party consultant for processing. Subsequently, the consulting party makes the necessary calculations, deductions, and payments to the appropriate quarters.

This is a good option for organizations with more resources and larger employee size.

5. Payroll management software

A payroll management software is a tool that allows for the automation of payroll management.

This software helps organizations manage all the processes and stages involved in payroll management, from the pre payroll to the post payroll processes. It provides an easy and accurate way to enrol employees, calculate wages and make necessary deductions. Payroll management software also makes automated payments into the designated bank account of employees.

Although payroll management software makes the entire process of payroll management easier to handle, it is important to have an extra set of experienced eyes to ensure that every item is as it should be. 

Therefore, outsourcing your payroll management services to reputable firms like TalentPEO is the step to take. 

6. Payroll Applications

This is the application software option for payroll management. These software applications usually provide a template for the input of the employee details and relevant input factors. A company can choose the best type of payroll software depending on its peculiarities, size, and composition.

Examples of payroll application software include: Paycor, EPAY Systems, OnPay Patriot Software Xero Toast Payroll  Zoho Payroll ADP Gusto Paychex.

How To Choose The Right Payroll Management Software

Choosing the right payroll management software is very important for every business organization. In essence, it becomes paramount to decide which payroll software will best suit the organization.

Payroll Management

Thankfully, you’ve got us to help you.

Here’s what to consider when choosing payroll management software:

1. Reputation

Before choosing a payroll software for your company, make inquiries about the developers and the efficiency of the software. A proper software review may be the difference between smooth financial operations and an incessant hassle with regulatory bodies.

In fact, we recommend requesting a free demo of the proposed software before full purchase. This way, you’re certain that the service it provides would meet your company’s needs.

2. Security

Of course, the last thing you want is a security breach in your organization. Especially when it involves finances.

It goes without saying that the payroll is a sensitive document that should be handled with the utmost discretion. Therefore, your payroll software options should be safe, steady, and reliable.

3. Business size

The size of the organization also determines the type of software to use. A large company may require software that can handle complexities.

4. Flexibility

A good payroll software management must be able to accommodate changes from time to time. It should also be easy to integrate with other financial processes of the company


Finally, a proper payroll system is really important for smooth business operation in every company. With the info in this post, you have all you need to create and manage an effective payroll and you can also get in touch with us to help you make your organization’s payroll process seamless. You can read our other article on Minimum Wage in Nigeria and employment outsourcing firms in Nigeria.

5 Replies to “Payroll Management Systems | All You Need to Know”

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  3. […] stay in the company. It ensures competent workers are recruited and issues relating to wages and payroll management are sorted in a professional manner. It is also a means through which employees have a good […]

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