1. Payroll Calculation and Processing

Payroll support services handle the accurate calculation of employee compensation, including gross pay, deductions, bonuses, overtime, and commissions. This involves:

A. Gross Pay Calculation

• Base Salary: Regular employees receive a fixed base salary, which forms the basis for their pay.
  
  

• Hourly Wages: Employees who work hourly are paid based on the number of hours worked, with overtime (if applicable) calculated according to labor laws.
  
  

• Commission and Bonus Payments: Salespeople or employees with performance-based compensation may receive commissions or bonuses. These need to be accurately calculated based on the business’s compensation structures.
  
  

B. Deductions

Payroll services manage all mandatory and voluntary deductions that reduce an employee's gross pay, such as:

• Tax Deductions: National and Local Taxation, social security, Medicare, and other related withholdings.
  
  

• Health Insurance Premiums: Employee contributions to health, dental, or vision insurance plans.
  

• Philheatlh Dedutions: contributions automatically deducted from an employee's salary in the Philippines to provide health insurance coverage. These deductions ensure employees and their dependents can access affordable healthcare services when needed.
  
  

• HDMF deductions: deductions, commonly known as Pag-IBIG Fund contributions, are mandatory salary deductions in the Philippines that help employees save for housing, loans, and other benefits.
  
  

• SSS Dedutions: Mandatory contributions taken from an employee's salary in the Philippines to ensure financial security during events like retirement, sickness, disability, maternity, or death

  
  

• Other Deductions: These may include union dues, charitable donations, garnishments, and other voluntary deductions (e.g., flexible spending accounts).
  
  

2. Compliance with Tax Regulations

Payroll support services ensure that businesses comply with complex tax regulations at the National and Local taxes These services include:

A. Tax Withholding and Remittance

• Payroll services calculate the correct amount of tax to withhold from employees' paychecks based on income levels, filing status, and other factors.

• Regular remittance of taxes to the appropriate tax authorities is critical. This includes:

  • National and Local Taxes: These taxes are determined by the jurisdiction where the employee works and may vary by state or municipality but Withholding tax rates and requirements may vary depending on whether the tax is national or local.
    

  • Employer Contributions: In addition to withholding employee taxes, employers must also make their own contributions for Social Security, Medicare, and unemployment insurance, which payroll services manage.
    
    

B. Tax Filings

• Quarterly Tax Filings: Most businesses are required to file quarterly reports to report payroll taxes and remit payments.
  
  

• Annual Tax Filings: At the end of the year, payroll services assist in filing annual reports and forms to ensure compliance with tax regulations and provide employees with necessary documentation for their tax filings.
  
  

C. Tax Reporting and Recordkeeping

• Payroll services ensure that all tax filings are accurate and submitted on time, reducing the risk of penalties and interest.

• Accurate recordkeeping is also essential for audits, tax inquiries, and financial reporting. Payroll services maintain detailed records of all payroll transactions, deductions, and tax payments.
  
  

3. Benefits Administration

Payroll support services also manage the administration of employee benefits, ensuring that employees receive the benefits they are entitled to, and employers comply with benefit-related laws and regulations.

A. Health and Wellness Benefits

• Payroll services handle employee contributions to health insurance, dental plans, vision care, and other wellness programs. They ensure that premium payments are deducted from paychecks and remitted to the appropriate insurance providers.
  

B. Retirement Benefits

• Payroll services help set up employee deferrals, calculate employer contributions, and report on retirement plans during tax filing.
  

C. Other Benefits

• Payroll support also manages other types of benefits, such as paid time off (PTO), vacation days, sick leave, and parental leave. This includes tracking accruals and ensuring proper deductions for time off taken by employees.
  
  

4. Employee Payment Distribution

Payroll services ensure employees are paid through various methods, such as:

• Direct Deposit: The most common method, where employees' wages are directly deposited into their bank accounts on payday.
  
  

• Paper Checks: For employees who prefer or require physical checks, payroll services issue checks.
  
  

• Payroll Cards: Some companies use payroll cards as an alternative to bank accounts, where employees receive their wages on a prepaid card.
  

Payroll services handle all logistics associated with timely and accurate payments, including addressing any discrepancies or payroll errors.

5. Payroll Reporting and Analytics

Payroll services generate detailed reports that provide key insights into payroll costs and trends, such as:

• Payroll Summary Reports: These reports outline total payroll costs, including wages, taxes, benefits, and other deductions, to help businesses monitor expenses.
  
  

• Tax Liability Reports: Payroll services track and generate reports showing the total taxes due for a given period and reconcile these with the amounts paid.
  
  

• Employee Earnings Reports: These reports show individual employees’ earnings, including salary, bonuses, deductions, and benefits.
  
  

These reports are useful for financial planning, budgeting, and auditing purposes. They can also be used for management reviews and forecasting labor costs.

6. Handling Special Payroll Scenarios

Payroll support services handle a variety of special payroll situations, such as:

• Overtime Calculations: For non-exempt employees, overtime pay must be calculated at a higher rate (typically 1.5x the regular rate of pay). Payroll services manage these calculations and ensure compliance with local labor laws.
  
  

• Garnishments: If an employee has wage garnishments due to debts (such as child support or tax levies), payroll services deduct the appropriate amount and remit it to the relevant authorities.
  
  

• Severance and Final Pay: When an employee leaves the company, payroll services calculate and issue final pay, which may include severance pay, unused vacation days, and other accrued benefits.
  
  

7. Compliance with Labor Laws

Payroll services ensure that the business complies with various labor laws, such as:

• Minimum Wage Laws: Ensuring that all employees are paid at least the minimum wage as per local, state, or national law.
  
  

8. Payroll Audits and Reconciliation

Payroll support services conduct regular audits to ensure the accuracy of payroll calculations and compliance with all tax laws and employment regulations. Reconciliation of payroll data is essential for identifying discrepancies, resolving issues, and maintaining accurate financial records.

9. Scalability and Integration

As businesses grow, payroll services can scale to accommodate increasing payroll complexity, whether through adding more employees, expanding benefits, or managing multi-state and international payroll. Payroll support services can also integrate with other HR and accounting systems for streamlined operations.