Paying Payroll, Pensions & Allowances
The main types of payment to employees are wages and salaries, payment of allowances, and T&E expenses reimbursement. For good employee relations, it is critical make these payments accurately and on time.
Processing Wages and Salaries
Payroll can either be run internally using payroll software or be outsourced to a specialist payroll provider to calculate what each employee has earned, make the necessary deductions for tax, national insurance and pensions, prepare the payslip, pay employee at right time and pay deductions to relevant bodies.
There are a massive range of systems and services on offer to process wages and salaries, ranging from those catering for SMEs to systems and services for global MNCs. The focus of all these systems and services is to reduce paperwork, streamline payroll management, ensure full security and fraud prevention, compliance with best practice and local regulations, and free up employee time for revenue generating tasks. These services also provide tax services, a range of payment methods, unemployment compensation management, and verification services covering social services and immigration, etc.
Payment of Wages and Salaries
The payment of wages and salaries varies by country depending on local practices and the development of the local economy. In Europe the large majority of payroll payments are paid direct to bank accounts via the ACH, while the use of cash and cheques varies. In North America cheques are used much more heavily, although payment via ACH is growing fast. In developing countries cash dominates payroll payments. Payment to card accounts is beginning to be an important alternative to cash payments.
Cash Payments
Payment of wages in cash is costly and onerous and is on the decline world-wide, but in many countries and companies it is still essential. Cash wage packets can be prepared in-house or by third party service providers. The main features of payroll cash handling services are payroll administration, preparation of wages and delivery of wage packets to employer's site(s).
In developed countries with comprehensive networks of cash dispensers/ATMs and with the majority of merchants accepting payments cards, cash wage payments can be replaced by issuing employees with a reloadable Visa or MasterCard debit card. Employees have the freedom use their money anywhere in the world that VISA or MasterCard is accepted, or get cash at ATMs.
Cheque Payments
The biggest issue in paying wages/salaries by cheque is the potential for fraud. Payroll service companies have developed highly secure, flexible and scalable solutions for printing and distributing payroll checks to eliminate payroll cheque fraud. Some suppliers provide multi-country, multi-currency cheque services.
Payroll cheque are slowly being replaced by direct deposit to bank accounts or card accounts.
Direct Deposit to Bank Accounts
The easiest and cheapest way to pay wages and salaries is by direct deposit through the local ACH to employees' bank account. But not all employees have bank accounts, so alternatives have to be provided. Services are now available to pay employees in many countries and in different currencies.
Direct Deposit to Card Accounts
For employees who do not have a bank account or do not want to be pai) and pay electronically to this card account. This is much easier than opening a bank account with all the credit and verification checks. The card gives the employees the freedom to use their money at all VISA or MasterCard merchants, or get cash at ATMs.
The replacement of payroll cheques with prepaid/debit payment cards gives employees immediate access to their pay and for employees without bank accounts it stops them having to use cheque-cash services which can cost up to 5% of their pay. The use of cards also removes the need to deliver cheques to each and every employee which can be very difficult for employers with networks of remote employees.
Payment of Allowances and Benefits
The easiest and most effective way to pay allowances and other benefits is by direct deposit to bank accounts or to card accounts. The use of reloadable debit cards/pre-paid cards has transformed the economics of paying allowances and benefits to a wide range of people, e.g. London Borough of Lewish reduced the cost of paying weekly allowances to 18 year olds by 62% as well as saving the recipients time and money to go to council offices and collect the benefit, a major automobile manufacturer uses a reloadable debit card to pay their sales incentives.