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7 key benefits of payroll management

With the right payroll management system, employers can simplify the whole payroll management process in just a few clicks.

In this guide, you’ll discover:

  • what is payroll management?

  • why is payroll management important?

  • what are the main functions of employee payroll management?

  • what are the stages of the payroll management process?

  • what are the main methods for managing payroll?

  • what is a payroll management system?

  • what are the benefits of payroll management software?

  • what should you look for in the best payroll management system?

What is payroll management?

Payroll management is how employers pay wages and salaries to their employees. It covers a multitude of tasks, including:

  • establishing payroll policies

  • defining remuneration components and packages

  • onboarding new hires and removing leavers from the payroll system

  • gathering inputs, like hours worked, and deductions, like PAYE 

  • calculating and verifying employee payments and tax obligations

  • running payroll software

  • distributing payslips

  • accounting

  • reporting.

Why is payroll management important?

Payroll management is an essential aspect of any business because it helps improve employee engagement and maintains regulatory compliance.

Without an efficient method of paying employees, calculating and filing taxes and maintaining accounting records, companies run the risk of disgruntled employees and government penalties.

Download our FREE Payslip template here

What are the main functions of employee payroll management?

Employee payroll management comprises several functions that help you pay your employees correctly and keep your business compliant with government regulations.

Calculating payroll

The payroll manager needs to check several components when calculating payroll. These include verifying employees’ salary and hourly rates and checking for any overtime hours worked. In addition, they may need to apply for vacation time, holiday pay and sick leave.

They also need to apply any mandatory deductions, such as pay-as-you-earn withholding (PAYE), plus any optional deductions, like health insurance, an employee may have selected.

Keeping records

The Inland Revenue requires employers to keep payroll records for every employee for 7 years. Employees can check their income summary information by logging on to myIR.

Maintaining compliance

Employers need to send an employment information form for each employee to the IR with every payroll run.

What are the stages of the payroll management process?

The payroll management process generally consists of 3 phases:

1. Pre-payroll

The pre-payroll stage is arguably the most important. Any rogue information here can have a knock-on effect in the payroll run.

Payroll managers gather relevant data for the pay period based on company policies and regulatory requirements, including:

  • hours worked by non-exempt employees, including checking timesheets

  • exception time, like vacation, sick and jury duty

  • employee adjustments, such as new hires, salary increases or changes to benefit deductions and tax withholdings.

You’ll use this information to process payroll.

2. Payroll calculations

In the second stage, payroll managers calculate each employee’s total gross pay during the pay period and then subtract taxes and deductions for the net pay.

Employee-related deductions include:

  • KiwiSaver employee deductions

  • PAYE withholding

  • Student loan repayments

3. Post-payroll

In the final stage, payroll managers:

  • pay employees

  • file payroll records

  • distribute payroll information to the HR and finance teams for admin and reconciliation purposes

  • pay taxes by the due date.

What are the main methods for managing payroll?

There are 3 main methods for managing payroll:

  • spreadsheets

  • outsourcing

  • software.

Let’s look at each one:

Manual payroll management using spreadsheets

This involves creating a payroll template with calculations and mathematical formulae in one or more spreadsheets. It’s best for employers with a few employees, like startups and small companies.

Manual payroll management is prone to errors, either in the template or failing to comply with payroll requirements. Such mistakes increase the risk of penalties.

Outsourcing payroll management

The second option is to outsource payroll management to a specialist third-party service provider that manages all aspects of payroll administration, including tax deposits, reporting and compliance.

An employer sends an updated payment schedule every cycle, and the payroll service reviews and updates all payments and deductions for each employee. As long as there’s no confidentiality issue, this option removes the headache of payroll management for the employer but may come at a higher cost than maintaining accurate payroll with an online solution.

Using payroll management software

The right payroll software saves time and reduces the administrative burden by automating labour-intensive tasks. It allows employers to accurately calculate gross wages, deductions, and entitlements — while maintaining some control over the process.

Plus, with MYOB payroll software, you can stay in the IR’s good books by automatically generating and submitting employment information forms. 

What is a payroll management system?

A payroll management system is a software application that automates payroll management.

It helps businesses:

  • manage wages, salaries, tax deductions, superannuation and other employee compensation benefits

  • pay employees

  • deposit employment taxes

  • maintain transaction records.

Some companies also use a payroll management system to track employee time off or accrual of vacation leave.

You can access a payroll management system either as a standalone application or as part of an enterprise resource Planning (ERP) or human resources management (HRM) system.

A cloud-based payroll management system:

  • keeps your data safe and accessible whenever and however you need it

  • eliminates payroll complexity and errors as it always uses the latest tax rates

  • ensures you’re compliant with country-specific regulations

  • focuses on your specific industry and market needs

  • gives you real-time visibility and reporting

  • grows with your business as you expand.

What are the benefits of payroll management software?

Automatically calculate payroll variables

Payroll management software automatically calculates the correct payroll variables like KiwiSaver contributions, tax, and annual leave. If something doesn’t look right, the software lets you know with a helpful error message.

Save time

Payroll management isn't the most exciting job in the world, and it’s likely your payroll manager doesn’t look forward to the monthly reconciliation. But using online payroll management software can make their job more enjoyable and save them a significant amount of time.

That means your payroll manager will have more time for other tasks, thereby improving your operations and reducing your overall costs. Switching to a cloud-based payroll management system will also reduce the tedious, repetitive work they have to do.

Simplify payroll compliance

The best payroll management software notifies employers about changes in employment or tax regulations that might affect their business. For example, it updates you about tax obligations and new IR tax changes and ensures you’re paying the correct minimum wage.

Reduce payroll errors

Payroll management software, especially if it integrates with time-tracking and HR programs, reduces repetitive data entry and helps prevent human error. Some systems allow employees to submit their bank, tax and KiwiSaver details through a self-service portal, which reduces paperwork tasks for HR and payroll teams.

Automate time-sensitive alerts

Many payroll management systems offer workflow notifications. If the software detects a data entry error, it sends an error alert to users, so they can correct it before processing payroll.

Improve data security

Payroll data is especially sensitive, as it contains personal information like birth dates and contact details. The best online payroll management software uses state-of-the-art security to protect employee privacy and company financial data from unauthorised access. This might not be the case if you outsource payroll to a third-party service provider.

Increase employee satisfaction

If people don’t get paid, they’re not going to turn up for work. Sounds simple, right? But navigating the reality of paying your entire workforce on time and accurately can be complex.

Payroll management software ensures employees get paid the right amount on time. Plus, modern online systems let employees access payslips, apply for leave and update their details from any device, and the data will sync in real time. 

What should you look for in the best payroll management system?

Tracks time and attendance

To calculate the correct wages for non-exempt employees, employers must accurately record working hours with time and attendance software.

Time-tracking is less critical for salaried employees since employers calculate their gross pay by dividing their annual salary by the total pay periods.

However, some non-exempt employees may have negotiated an overtime rate, in which case, you must track their hours to ensure that you pay them the correct amount. 

Calculates employee wages

Employers must process payroll deductions, including: 

  • KiwiSaver 

  • PAYE

  • student loan repayments

  • insurance premiums

  • mandatory deductions, like child support payments.

Payroll software can manage all these deductions and calculate the employees’ correct net or “take home” pay.

Complies with payroll regulations

The IR requires employers to keep payroll records for every employee and contractor. As an employer, you need to keep comprehensive records of wages, time worked, leave and other details.

Provides employees with pay statements

With payroll or accounting software, you can automatically send employment information forms to the IR at the same time you run your payroll.

Employees can then check their payment summary information by logging on to myIR.

Keeps employee data secure

The best payroll management systems use state-of-the-art security to protect sensitive employee data. They can run updates for you, automate your account security and remediation activities, and inform you immediately about any suspicious or fraudulent activity they detect.

Enables employee self-service

Cloud-based payroll management systems come with an extra benefit: employee self-service. For instance, employees can submit their bank, tax and KiwiSaver fund details through a secure self-service portal. Employee self-service takes a heap of work off your shoulders and empowers employees to manage their details.

Integrates with your existing workflows

Look for payroll management software that can integrate with your existing workflows and processes, like onboarding, rostering, leave requests and time tracking, so you can operate more efficiently, reduce repetitive data entry and prevent errors. Or you could combine it with your ERP system for a fully-integrated business, people and payroll management solution.

Provides analytics and reporting

Payroll software drives better decision-making with comprehensive analytics and accurate reporting that you can control and customise.

You can access key information online, including leave, personal info, payslips and timesheets, whenever and wherever you want.

Provides anywhere access

The best online payroll management systems provide 24/7 access so that you can manage payroll queries on the go.

Simplify payroll management with MYOB

Payroll management is an essential part of every business.

If you don’t pay your employees, they’re not going to work. Moreover, you need to pay them correctly and on time.

Download our FREE Payslip template here

Running payroll can be a tedious, error-prone task, but you can simplify that by using a payroll management system. Simplify payroll management with MYOB. Try it for FREE.


Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.

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