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16th March 2022

What is a Payroll System and How Does it Work?

Every organisation, no matter how big or small, needs to run payroll. Without payroll, employees and tax don’t get paid, which can be bad for business. Find out everything you need to know about payroll software, and how it can revolutionise your company.

What is payroll?

Payroll is the process of paying your employees for the hours they have worked within a set time period. 

In larger businesses, payroll is usually managed by the Finance or Human Resources department, or directors and associates in smaller companies.

In most cases, the payroll process encompasses the following steps:

●       Determining whether the payroll system is internal or outsourced

●       Deciding the payroll policy

●       Collating employee information

●       Setting up the direct deposits

●       Integrating a time tracking solution

●       Review timesheets

●       Verify and submit payroll

●       Create, save and store payroll records

Payroll can be a time intensive and repetitive process due to the amount of admin and steps. As a result, it's easy to make a lot of mistakes when companies manage their payroll inhouse.

To remedy this we’re seeing more and more business owners outsource their payroll to third party vendors.

What is a payroll system?

Payroll software (or a payroll system) helps professionals manage and simplify the payroll process and increase efficiency. Payroll software can take care of the following:


Labour is one of the highest expenses a company can have. For companies with salaried and hourly employees, contractors and more,  managing all of this can be difficult.

Payroll software can simplify this by generating a wide range of reports for contractors, and employees who are salaried or on hourly pay. Creating these reports can be done with ease, thanks to pre-set reporting templates. This means managers can understand costs and overheads for any time period at the click of a button.

Time and Wages

Payroll systems remove the need for manually calculating how much employees need to be paid based on their hourly or salaried wage and holiday pay. The software alters gross pay by calculating and subtracting taxes, National Insurance and more. Employees are automatically sent payslips with a clear breakdown of this information.

Taxes and Withholding

Tax obligations are calculated within the system, along with any other deductions. This ensures complete calculation accuracy and significantly reduces the risk of any errors. By automating tax calculations and HMRC submissions the risk of non-compliance and associated penalties is also greatly reduced.

There are several reasons why business owners choose to outsource their payroll management, including:

●       Reducing the risk of costly errors

●       Freeing up staff time and resource

●       Removing the need for purchasing and maintaining an expensive payroll system

●       Remaining compliant with PAYE and tax obligations

●       Paying employees and tax on time


What are the benefits of outsourcing payroll with PayEscape? 

●       Ensures data compliance and accuracy

●       Real time access to data and reporting

●       CIPP certified professionals keeping your business up to date

●       Time and resource is freed up

●       Improved efficiency


Speak to PayEscape today and simplify your payroll

Your payroll is one of the largest components of operations, so it should run smoothly and easily for your team.

Our payroll technology and options for  integrated HR admin and time management tools make it easy to manage employees and ensure compliance. Simplify your payroll in 2022. Book a demo with our team today.

Need help to understand what solution is best for your business?

Speak with our expert team today on 028 2764 1060

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Payescape Limited is authorised by the Financial Conduct Authority under the Payment Services Regulations 2017 (register number 821826) for the provision of payment services.

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