Why do you need payroll software
Payroll - all important information for entrepreneurs
Put simply, the payroll is evidence from the employer of what employees have earned for their work or performance within a certain period of time. But although the payroll appears simple, there is a lot of preparatory work behind it every month and you as an employer should prepare it with absolute care.
Most companies use a payroll program to create their payroll. The reason: Thanks to interfaces to the social security agencies or the tax office, the wage software can, for example, shorten time-consuming processes and avoid possible errors. If you do not have the necessary commercial know-how internally, you can outsource payroll accounting to a payroll office or a tax advisor.
The most important things about payroll at a glance:
- The payroll or payroll codes the Composition of wages or salaries of an employee for a certain period of time. Read more.
- According to Section 108 of the Trade Regulations, employees have Entitlement to a pay slip. More info.
- The remuneration statement regulation gives a certain content design and a structure. More here.
- The use of a modern one is recommended for small and medium-sized companies Pay program, as this saves costs for an external service provider. Learn more.
- Error in payroll can sometimes be remedied quite easily. Correcting the wage tax deduction, however, involves a lot of effort. Read more.
Definition: What is a pay slip or payroll? The explanation here!
The payroll, also known as payroll, payroll, payroll or earnings accounting, documents the Composition of the wages or salaries of an employee for a certain period of time - usually for a month.
The pay slip contains, for example, information about tax deductions, allowances or surcharges as well as the net salary.
There are no strict rules about what a payroll should look like and what information must be where. However, the employer must ensure that all deductions from the gross salary are correct and that the employee can transparently understand how his net wage is composed.
The wage slip is important for employees, as they need it, among other things, for the income tax return. Even when it comes to lending or looking for a place to live, you can come without a corresponding one Proof of liquidity not very far.
What is the difference between wages and salaries?
The terms wages and salaries are often used synonymously. However, there are crucial differences:
- wage is the pay for workers whose performance is either according to hours actually worked or billed on the basis of the number of items produced. A distinction is made between piecework wages, hourly wages and piece wages.
- salary is a firmly agreed, regularly recurring payment for employees. The base salary remains the same every month.
Wages and salaries differ not only in the type of employment, but also in the respective scope of work.
Is it compulsory for employers to prepare pay slips?
The legislator has stipulated that a paper pay slip is generally mandatory for employers. In § 108 trade regulations it says:
"The employee is to be given a statement in text form when the wages are paid. (...) The obligation to bill does not apply if the information has not changed compared to the last proper billing. "
A new pay slip is mandatory even if the deductions are changed
The term "information" does not only include the wage components that you have contractually agreed with an employee. It is also about the deductions that affect the employee. If, for example, the contribution rate of the health insurance company changes, you have to create a new statement in the corresponding month and hand it over to the employee concerned.
In fact, almost every employee expects to be billed monthly. Because basically it is absolutely unusual not to send a monthly pay slip, even if it is not a legal obligation. To avoid misunderstandings and resentment within the workforce, we recommend that you choose one of the following two approaches:
- No monthly billing:
Explain right from the start that the payment will remain unchanged month after month and that a statement will therefore not be issued on a monthly basis. For example, agree that a statement will always be made at the beginning of each year. As a result, the employee only receives a statement if, for example, vacation or Christmas bonuses are paid or other relevant information changes.
- Basically bill every month:
Communicate to your employees that a wage or salary slip will be made available to them every month. With modern payroll software, the documents can be automatically sent to the employee's email address. This saves time, postage, paper and queries.
When are the wages and salaries due?
In most companies, employees are given or sent the wage or salary slip either a few days before or after the remuneration has been transferred. A legal deadlinestating that the statement is to be handed over when the wage is due, is there however Not. After all, the employer does not have to issue a wage or salary slip if certain values have not changed since the last payroll.
Payroll: also mandatory for employees on an hourly basis
The obligation for employers to draw up a pay slip also applies to marginal part-time employees, such as mini-jobbers, and other employment relationships on an hourly wage basis. If employees are paid per hour, this usually results in different information and values every month. In this case you have to create your own and therefore new pay slip each time.
Structure of payroll accounting
On July 1, 2013, the Remuneration Certificate Ordinance (EBV) came into force. Since then, as an employer, you have had to adhere to a certain content structure and a prescribed structure when creating a wage and salary statement. The information is divided into two groups:
Information about the person and the company as well as remuneration and deductions.
The following components must be included in a pay slip:
- Name and address of the employer
- Name, address and date of birth of the employee
- Social security number
- Start of employment or end of employment
- Billing period
- Employee tax information
- Social security data of the employee
- Vacation data as well as other contractual and personal data of the employee
- Gross wage / gross salary
- Remuneration in kind, benefits in kind, personal deductions, expense allowances
- Contribution to company pension schemes and capital-building benefits
- Tax deductions and allowances
- Social security contributions employees
- Payout amount
- Total employer
- Employee account details
Often there is also a note in the final part that the wage or salary statement has been created in accordance with the requirements of Section 108 (3) sentence 1 of the Remuneration Statement Ordinance.
A sample for a correct payroll can be found here.
Mandatory information on the pay slip
Here, too, § 108 of the trade regulations comes into play. Point 1 says:
“The statement must contain at least information about the accounting period and the composition of the pay. With regard to the composition, information about the type and amount of surcharges, allowances, other remuneration, type and amount of deductions, payments on account and advances are required. "
Employers have a duty to prepare the pay slip in such a way that the employee can understand and understand it. Therefore must the following mandatory information be included in any case:
- Billing period
- Name and address of the employee
- Number of children that must be taken into account for tax purposes
- Tax class of the employee
- Allowances to be taken into account
- Gross wage amount
- If allowances are paid for night, Sunday or public holiday work, their type and amount
- Type and amount of further allowances or payments on account, for example Christmas or vacation pay
- A detailed list of the type and amount of all deductions withheld
- Amount of the net wage to be paid
In addition to this mandatory information, the payroll can contain other aspects.
The retention of the statutory deductions is mandatory. In addition, voluntary deductions, such as union fees or savings installments as part of capital-building benefits, can be withheld.
For all employees who are not employed as marginal part-time workers or student assistants to calculate and pay the following statutory deductions:
- Income tax according to the employee's tax class
- Church tax, if the employee belongs to a corresponding denomination
- Solidarity surcharge
- Contribution to health insurance
- Additional contribution from the respective health insurance company
- Contribution to long-term care insurance
- Contribution to pension insurance
Marginally employed do not pay taxes, health insurance or long-term care insurance contributions. Theoretically, they also have to pay a small contribution to the pension insurance. You can, however, be exempted from this compulsory pension insurance, which many employees also take advantage of. However, this decision must be made when the employment contract is concluded and is then valid for the entire duration of the employment.
At student assistants There are usually no social security contributions, but these have to pay tax on their income.
Further components of payroll accounting
Allowances often have an impact on taxation. Some allowances and supplements are tax-free, others are not or only under certain conditions. It is therefore important to indicate the type of allowances and deferred earnings in the pay slip.
Basically taxable are Wage bonuses how
- Hazard allowances
- Difficulty allowances
- Overtime allowances
- Heat or water surcharges
- Dirt allowances
Taxable allowances are included in the earnings subject to social insurance.
Allowances for work on Sundays, public holidays or at night (SFN) are an exception: These remain up to certain maximum amounts tax free.
Surcharges for the vacation period are fully taxable. The reason: The variable remuneration included in the vacation pay does not relate to the SFN bonuses actually paid. This regulation also applies to supplements that are paid during maternity leave and in the event of continued payment of wages.
On the Social security contributions surcharges also have an impact: SFN surcharges exempt from income tax must be added to the salary and are therefore subject to contributions - provided that the underlying wage is more than 25 euros per hour. In this case, there is an obligation to contribute to health, long-term care, pension and unemployment insurance. The entire SFN surcharges are subject to contributions in maritime and accident insurance.
Many employers shy away from the effort of preparing the pay slip themselves. There is often a great deal of uncertainty with regard to the legal requirements. If you don't want to risk mistakes, it is best to use a professional payroll program or hand over the payroll to an external service provider.
Note that outsourcing payrollquite inflexible is because all communication on pay slips or questions from employees must go through the service provider. It also keeps falling additional costs at
Save time and money - with a payroll program
A far cheaper option is the use of a special payroll program. Once incorporated, the payroll can be done quickly. In addition, the payroll programs are updated regularly always up to date with the latest legislation held.
Integrated wizards guide you through the billing process step by step. Small and medium-sized companies in particular benefit from this solution.
What are the consequences of incorrect payroll accounting for employers?
As a rule, a pay slip is always drawn up with particular care. Nevertheless, one or the other mistake can accidentally creep in. Often it is a question of disregarded vacation or sick days, forgotten overtime, missing working hours or overlooked surcharges. We have put together below how you can correct various errors.
Typical errors in payroll accounting and their correction
- Too much withheld income tax
If the employer has withheld too much income tax, the employee can in turn get this back using the income tax assessment.
- Social security contributions paid too much
Overpaid social security contributions may be deducted from the employee's wages or salary within the following three months after accounting.
- Insufficiently paid social security contributions
Insufficiently paid social security contributions are to be paid by the employer.
- No correction for electronic income tax certificate
It becomes much more complicated if the electronic income tax certificate has already been issued and sent to the tax office. A correction of the wage tax deduction is then namely no longer permitted. In order to remedy this error, you must immediately report to the business premises tax office. A so-called liability-free notification is created there so that the tax office can claim the insufficiently levied wage tax from the employee.
Since you as an employer are liable for the correct calculation and payment of wage tax according to Section 42d of the Income Tax Act, subsequent correction is not always easy.
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