what-are-the-components-of-payroll-2

What Are the Components of Payroll

2023/01/21

A company will not exist without manpower. And you have to pay for that manpower. Thus, a payroll system is needed. Such a system is a program or software that is utilized to streamline and manage employee salaries and payments. It manages and automates salaries given to employees for the rendered services. The payroll system in the Philippines makes sure that paychecks are disbursed on time and in compliance with government regulations whether local or national.

Payroll software in the Philippines is a great partner for HR. Automation frees up some time and human resource teams can do other tasks, such as planning and budgeting, not just engulfing themselves with payroll preparation.

While the payroll software works in a variety of ways going beyond salary disbursement, payroll on the other hand is basically the process of paying company employees which would include tracking hours worked, calculating employees’ pay, and distributing payments via direct deposit to employee bank accounts or by check. This is just one piece of the pie, yet the process is also tedious and time-consuming.

However, apart from giving the net pay to employees, companies must also keep a close watch on accounting functions to record payroll, monitor taxes withheld, compute bonuses, and calculate overtime pay as well as sick leaves and vacation leaves. And then comes government requirements. Companies must also put into account the amount to be paid to the government for  Social Security, Philhealth, PAGIBIG Fund, and others. 

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Easy HR helps your HR team manage employees through robust record-keeping and payroll functions.

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EasyHR Logo

Easy HR helps your HR team manage employees through robust record-keeping and payroll functions.

Click to Learn More.

With all these, payroll is crucial to a company. According to Investopedia,  “Payroll is the compensation a business must pay to its employees for a set period or on a given date. It is usually managed by the accounting or human resources department of a company. Small-business payrolls may be handled directly by the owner or an associate.”

Most HR of companies handle their own payroll while increasingly, there is payroll that is being outsourced to specialized firms that handle payroll processing, employee benefits, insurance, and accounting tasks, such as tax withholding. But here in the Philippines, payroll is usually done and performed by the company’s Human Resource Department. 

There are many payroll systems in the Philippines that are leveraging technology to simplify payroll processes. These solutions are payroll software and programs that offer employees greater convenience, accuracy, and speed as well as provide digital payroll-related documents with innovative technology-enabled services.

Payroll takes most of the expenses of a company and it is an important aspect of every business. Now that we have talked about payroll quite extensively, let us now discover the different components that make up a payroll.

What are the components of payroll?  

Usually handled by the HR department, the payroll has to be comprehensive and detailed enough. It has to be precise and accurately marked up according to government regulations. Any erroneous details no matter how small can result to major problems later on.

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Easy HR helps your HR team manage employees through robust record-keeping and payroll functions.

Click to Learn More.
EasyHR Logo

Easy HR helps your HR team manage employees through robust record-keeping and payroll functions.

Click to Learn More.

To get a better grasp, here are some components of payroll

  1. Employee data – This includes all the necessary information pertinent to the employees. Before an employee is fully employed, they need to fill out the prerequisite information as required by the government and company policies.
  2. Pay Policy – Every company has its own set of policies. These policies need to be defined and detailed in employee handbooks. This will serve as a guide in making sure that each one in the organization is fully aware of these policies and how they can benefit from them.
  3. Basic Salary – This is the basic pay as agreed upon by the employer and the employee. Many factors influence the base pay. The most critical one is the designation and hierarchical position of the employee. Another factor to consider is the scope of work and the responsibility to the position. The basic salary is fully taxable.
  4. Allowances – These are additional payments provided by the company to the employee as part of their benefits. Allowances can vary from company to company and are reliant on the designation of the employee. Some receive clothing allowance, medicine/ health allowance, and transportation allowance.
  5. Deductions – This refers to the amount that is subtracted from an employee’s paycheck every month. These deductions can be divided into two kinds – voluntary and involuntary. Involuntary deductions are the taxes and withholdings. While, voluntary deductions can be health benefits, stock options, insurance premiums, and investment premiums. Where available, there may be personal loans that are also deducted monthly.
  6. Gross Salary – This is the total cost incurred by the company to employ someone. The gross salary is the employee’s wage before any deductions are made.
  7. Net Salary – This is the total amount payable after all the deductions have been deducted, which is the salary that the employee takes home. The net salary can differ according to the employee’s deductions per month.
  8. Ad-Hoc Pay – Ad-Hoc pay is basically dependent on the company’s policies. This is usually the most sought-after in companies. This includes any extra benefits that are occasionally doled out to employees such as bonuses, incentives, festival advances, leave encashments, and wage advances.
  9. Taxes and Government Deductions – They say, “There are only two things in life that are certain; death and taxes.” Unless your employees are based in countries that don’t tax lower wage earners this is essentially true in the Philippines and all parts of the world. The other mandatory deductions will vary based on your location. Payroll systems in the Philippines would include Pag-IBIG, SSS, and Philhealth.

Processing payroll can be a daunting task but with a dependable and reliable payroll system in the Philippines, you are in good hands. There are several guidelines and laws involved that need to be met but overall, payroll management is a breeze when you go through all the payroll components with the help of payroll software like easyHR.

Give Your Good Employees a Great Tool!

easyHR is a great tool your employees deserve. Automate statutory payroll deductions like BIR, HDMF, SSS, and Philhealth. Automate DTR computation of tardiness, absences, undertime, overtime, Holidays, and all leave types. Automate manual and repetitive tasks like preparing reports for the BIR, HDMF, SSS, and PhilHealth.

Check out easyHR today! Book a FREE Demo: https://human-incubator.com/easy-hr/

EasyHR Logo

Easy HR helps your HR team manage employees through robust record-keeping and payroll functions.

Click to Learn More.
EasyHR Logo

Easy HR helps your HR team manage employees through robust record-keeping and payroll functions.

Click to Learn More.

Easy Series

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EasyFIS is a Software-as-a-service (SAAS) sales, inventory and Accounting system designed for Micro, Small and Medium (MSME) Enterprises.

If you want to manage your business in real-time and in a WFH Work from Home Setup, EasyFIS can provide a turn-key solution to your most common business problems to effectively monitor your sales, checking your LIVE inventory stock quantity and most importantly the status of your business’ financial health.

On top of that EasyFIS is CAS (Computerized Accounting System) compliant ready for government taxation in the Philippines.

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EasyHR is a Software-as-a-service (SAAS) web application that helps to manage your Payroll and Human Resource Tasks easily and effectively.

Whether you are handling less than ten (10) employees or up to more than ten thousand (10,000) employees, EasyHR can do the job for you and saves you a lot of time in computing your Payroll and managing your Employee 201 Records anytime and anywhere.

But not only that, EasyHR further has an Employee Portal that allows your employees to access it online and check their own Payslips, Overtime, Leaves and Time Records. It saves a lot of time and money in printing these Payslips and paper wastage.

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EasyPOS is a standalone Sales and Inventory system designed for businesses with Physical Stores and does not necessarily need an Internet or cloud solution.

The software is very easy to use yet already fully loaded with the necessary daily functions in running a store.

It already has a complete Sales and Inventory system with Item components.

Barcode and Touchscreen Interface that can be used for both groceries and restaurant setup respectively. Plus it is already BIR Accredited to legally issue Sales Invoice (SI) and Official Receipts (OR).

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