Common Types Of Payroll System - Which One Is Suitable For Your Business?

Unless your business consists only of yourself, or a couple of people, you have to find a way to effectively manage the wages and compensation process of the whole company. It is not an easy task to maintain a well-running payroll system, but it’s an obligation to not only legalize your business but also for the workforce management to work properly. That’s why a decent payroll system should be in question for most small-and-up businesses. Below are some common choices that businesses often opt for when having to decide on a payroll system.

Manual Management of Payroll

The first and oldest type of payroll system is by hand. It has been in existence before the modern technology revolution took place. Until nowadays, this method is still valid and usable as its biggest plus is low cost. However, manual payroll systems are usually helpful only if your business includes just a few employees – say, up to five.

This type of payroll system includes a lot of risks. Since you have to check and maintain everything  using your own human labor and not a program, there might be mistakes and errors even if you have double or triple check the payroll work.

Computerized/Automated Solution

Automated payroll systems take advantage of computerized, programmed software to automatically do large parts of payroll tasks, such as tracking employees’ time, calculating work hours, and so on. This is a good alternative to the manual payroll system and almost a must for companies with more than 10 employees, as it will help to save resources and process more effectively a large amount of data, which those enterprises often have to deal with.

Furthermore, having been computerized or programmed according to certain algorithms also means that less errors will be made with this kind of payroll system. This saves the company from unnecessary mistakes caused by HR staff’s negligence when processing data manually, which in turn might prove troublesome.

Those are categories based on the method used to build and run a payroll system. Let’s also look at the types of payroll system categorized by the host:

In-House Payroll System

There are enterprises with built-in payroll system, i.e. one run by the business’ own staff and resources.  In-house payroll systems can be manual or automated. The manual ones are, as mentioned above, less reliable. And for the other, while secure and fully customizable, a full-stack automated payroll system is costly since it requires extensive resources, especially as the business scales to bigger sizes, making it more suitable to larger corporations where budgeting is not a problem.

Outsourced Payroll Solution

Due to demanding work and time-consuming processes, a number of businesses opt for outsourcing their payroll system to a third party. This party will bear the responsibilities of all the payroll-related management in place of an in-house computerized or manual system. The benefits of an outsourced payroll system include less time and labor consumption, fewer mistakes and lower risks, more accuracy, ensured legal validity, and higher productivity. This is ideal for small to medium businesses who wants to save cost but also have a decent payroll system that works well just like a full in-house one.

Mixed System

A mixed type of payroll system utilizes both in-house and outsourced payroll service. Depending on their need and budget, some companies may want to maintain part of their payroll workload with their own staff, and put the rest on an outsourced system. This method helps with flexibilities and adaptable results. However, for it to work properly and bring true value to your business, make sure the system you outsource is compatible with your thorough process of HR management.

These are among the most common options for a payroll system. Depending on your company size and other aspects, you may want to adapt it to suit the specific needs of the business. As technology evolves, there might be more methods to managing a payroll system that are available in the future. But whatever your choice would be, keep in mind that a good, reliable payroll system is compulsory to effective HR management.

If you have any questions, do not hesitate to contact our Payroll service in Vietnam.