What is Payroll? Definition and Explanation on How It Works

Have you ever heard of the term payroll? For an employee who works in a company, the word payroll may be familiar to hear. Payroll is a system that is used to pay the company’s employees.

Considering that payroll is quite vital in a company, you may want to know how it works and how to do payroll. Without further ado, check out what Clockster has summarized about payroll here.

What is Payroll System

What is payroll? Payroll is a system for paying the workers by using automatic software. You can say that the payroll system is a modern technique used by companies with a lot of employees.

The Duty of a Payroll Officer

What is payroll officers? In a company, those who are responsible for payroll’s task is called payroll officers. Not only distributing and ensuring that salary has been received by the employees, there are also other responsibilities that you need to know such as:

Prepare the Employee’s Data and Its Salary Details

First, a payroll officer needs to prepare all documents that are related to the employee’s payroll such as attendance data and composition details of the salary.

Not just the main salary, but including other components such as allowances, overtime pay, and other bonuses. Those details will be needed and used to make sure the company’s financial budget is being controlled well.

Create Salary Slip

Other than organizing the employee’s salary details, a payroll officer also needs to create a salary slip. Later, this document can be used by employees to apply for a credit card, for example.

Customize Payroll

Although anyone can use this payroll system, there are some activities that only can be done by the payroll officers, such as inputting personal data or the total number of employees in a company.

Benefits of Payroll

Payroll is more than just an employee’s salary paying system. It is also beneficial for the management and other divisions. Here are some benefits of payroll.

Help the HR’s Work

Payroll is a system that can be advantageous for human resource management in a company. As an HR, it is our duty to fulfill the task of payroll, and this system would make the work more efficient

Why? Because the payroll officer, which is a part of the HR department, will only need to prepare the document and employee’s data, while the salary calculation is done using the payroll application.

Find Out the Salary Details

Other than the HR department, payroll accounts are also beneficial for the employees. Through this system, the employees can easily look at the salary components they’ve received. Starting from the total of their main salary until overtime pay will be clearly stated there.

How Payroll Works

As it is known by a lot of people, right now, the task of a payroll officer is becoming more effective and easy with the help of software applications. Regardless, payroll itself is an activity that involves several processes. Read how payroll works in a company through the explanation below.

A Summary Report of Employees’ Attendance

A summary report of employee’s attendance is the basis of the employee salary payment on the payroll. From the regular working duration, days of leave to big holidays are some points that are being weighed up on the report.

Calculation on Intensive and Other Bonuses

An employee may expect an extra bonus from the company when they manage to exceed certain targets. With that, anyone who has a duty to handle the company’s financials needs to be aware of that employee’s achievements.

Process of Salary Deduction

The amount of salary that an employee receives has been reduced from the deductions that have been organized, whether it is due to the government’s or company regulation.

All the activities above can be easily executed through a payroll application. Once again, the payroll officer is only responsible for completing the employee’s document, and the rest, let’s say the calculation of payment, is done by the payroll system.

Clockster has stood as one of the HR management websites that provides payroll features for your company’s needs. How does our payroll work? Visit Payroll Clockster for more information.

Payroll Calculation

After knowing what is payroll and how it works, this is the time for you to understand the payroll calculation for each employee in a company.

Basically, every company will have different payroll systems. However, there are some basic points here that need to be highlighted:

Permanent and Contracted Employee

According to the decree of the Ministry of Manpower and Transmigration No.100/MEN/1V/2004, there’s a difference in calculation between Permanent Employees with Permanent Employment Contract (PKWTT) and Contract Employees with Fixed Term Employment Contract (PKWT).

Permanent Employee

PKWTT regulates their permanent employees to work without an end date for employment (except for retireme, resignation, or pass away). These employees have the right to receive a pension from the company.

Contract Employee

According to PKWT, contract employees are workers who work for a certain period of time. On the other hand, these employees don’t have the full right to receive a pension.

That is all information related to payroll that Clockster can provide to you. There are a lot of things that an employee should know other than the payment system. Check out Clockster blog for more informative articles.