The Four Components of Payroll

As part of the HR and Payroll 101 series I wanted to take a closer look at the individual parts of the payroll process. Generally, there are 4 components to any payroll process, and this is usually country agnostic.

If you have ever been involved in payroll generation this number probably seems quite low. You could pick up any employee’s payslip and list maybe 10 items from their payroll alone, and your not wrong. However, this is part of the problem.

Most payroll admins structure their payroll process around the tax status of the items being credited or debited, or based on the individual line items themselves. These approaches can work, but they won’t be the most efficient. They will lead to unnecessary repetition, and increased resource requirements to administer. By knowing the four components, and how your payroll items fit into each, you will be able to apply your knowledge to streamline your overall payroll process.

Gross Compensation

Gross compensation is probably the easiest to understand. It’s any item that makes up your employee’s basic compensation package.

The first item is base pay, which is just one aspect of the overall gross compensation. However, this is usually the bulk of any employees payroll. There’s generally 3 main types of gross pay:

  • Salary: Employees get paid the same fixed amount each payroll regardless of their attendance
  • Monthly: This is similar to salary. Monthly paid employees also get an amount each month but it’s not fixed. It will fluctuate based on their attendance. For example, they may receive less gross pay if they come in to work late and more if they worked overtime.
  • Hourly: Employees are paid for the exact hours they work. So if you were being paid $1 an hour and worked 100 hours you would receive $100 as your gross pay.

Other notable mentions for base pay would be daily rates and piece meal. The former being employees who get paid per day and the latter per item they complete.

Overtime is usually paid at a premium to employees. The standard practice is to pay overtime at a certain percentage of the base pay rate. E.g. 125%. So if you were paid $10 an hour and then worked overtime you would get $10 multiplied by 125% which equals $12.50.

For other multipliers, these work in the same manner as overtime but are applied in different scenarios. For example, it’s not uncommon in most countries to provide additional pay to employees if they come into work on a public holiday. 

In the Philippines the rate is 200%. So the same $10 base rate would be $20 on a regular holiday.  This is also why we call them multipliers, because you multiply the scenario percentage by the base rate.

One thing to note, some companies don’t multiple but actually do addition. In the UK where there is no government mandated rate for working overnight. It’s not uncommon for employers to pay an extra £1 or £2 for work done late at night. These would also fall into this category.

The last one, and this depends on your companies process would be leave pay. If you don’t pay these out as separate line items they will be part of the base pay and so therefore part of the gross compensation. This is far more common with monthly and salary paid employees than any other type.

Recurring Items

“The important thing to remember is these items will be credited or debited from an employee on a strict schedule. Either for an ongoing period of time or in perpetuity”

From this point on, the component descriptions I provide are not exhaustive lists. You potentially have other payroll items that you provide that will fall into one of the four components.

Recurring items are those other payments that you credit or debit to employees every payroll. This might be for a preset period of time or in perpetuity.

It’s important to clarify that the amounts of these recurring items may vary from payment to payment.

A great example of this would be the Cost of Living Allowance in the Philippines. It’s a government mandated allowance saying that all minimum wage employees should receive 15 pesos for each day worked. So the amount paid out will always fluctuate based on the amount of days worked in the pay period, but it’s always paid each pay period.

Usually all allowances are recurring items, the frequency may change (either per payroll, per quarter, per month etc.) but they are consistently deducted on the same schedule.

Loan payments are another great example and illustrate how the payment doesn’t need to be deducted forever. Usually, if you give an employee a loan, they pay it back over X pay periods until the original amount is repaid.

Subsidized benefits are a huge catch all. Companies will give their employees certain benefits where the company covers most of the cost. However, the employee needs to contribute some amount. These are consistently deducted every payroll and continue until the employee either leaves or decides they don’t want to avail of the benefit any longer.

As mentioned, this isn’t an exhaustive list. The important thing to remember is these items will be credited or debited from an employee on a strict schedule. Either for an ongoing period of time or in perpetuity.

Ad hoc Items

“These items are infrequent, and the amount always vary. They are not deducted or credited to an employee each payroll.”

Ad hoc items are those infrequent payments that you have to make on payroll. Adhoc is a latin phrase that means “for this.”   When you are doing something on ad hoc basis you are doing it for that specific case and no other.

Adjustments are a great example of an ad hoc item. Every time you do an adjustment you are making it to fix a specific error or issue. You are making the payment for this specific scenario.

Expenses would also come under this category, every expense payout is done for a particular expense or expense report. These are always handled on a case by case basis.

Sure you may have employees that submit an expense report with some frequency. You might have an employees who do a lot of driving for work and are allowed to claim their miles back on expenses. They may even submit an expense claim form every month.

However, if that same employee ended up working at head office for the entire pay period and didn’t drive any where they wouldn’t receive a mileage expense. Whereas if they received a car allowance, which is a recurring item, they would still receive the amount.

For breakages and spillages, in the food and beverage industry it’s not uncommon to charge the server if they break a plate, glass, etc. Again, these types of payments are always made for the specific incident.

Finally, Vacation Leave and Sick Pay would live here if you don’t include them in the gross pay. This might seem counterintuitive to you, but again think about the format we have established. Employees take leaves on an ad hoc basis, and when you pay their leave pay it’s done for a specific leave request.

Again, this list is not exhaustive and it’s important to note you might and probably do make these types of payments EVERY payroll. However, they usually won’t be to the same employees, and for the same amounts. Don’t get me wrong sometimes an employee might break the same glass or claim the same amount of miles so their amounts are the same, but this is because of circumstance and not because they are recurring items.

Just remember, these items are infrequent, and the amount always vary. They are not deducted or credited to an employee each payroll.

Government Deductions

Finally we have government deductions, and you know what they say; “there’s only two things in life that are certain; death and taxes.” Unless your employees are based in countries that don’t tax lower wage earners this is definitely true.

The other government deductions will vary based on your location. In the Philippines this would be Pag-IBIG, SSS, Philhealth. Singapore have charitable deductions and CPF. The UK has national insurance and Canada EI and CPP etc.

Most, if not all, governments have their own mandated deductions that employers have the responsibility to deduct. It’s vitally important to ensure you make these deductions on time and in line with your local laws.

So that’s the four components. Gross Compensation, Recurring Items, Ad Hoc Items, and Government Deductions. If you are designing your own payroll process, or trying to improve your current one categorize your payroll items into these four areas. Once done, you will be able to create processes for each component that will allow you to streamline your process.

For any questions, please ask in the comments below. Thanks!

New: Reminders For Your Employees via Facebook Messenger

Do you have employees who forget to clock in and the start of their shift, or forget to clock out at the end?  Well, we can help, we have a new tool that reminds your employees of their schedule.

If PayrollHero has not received a clock in or out from your employee, they can be reminded 15 minutes prior to their schedule or after the completion of the schedule, automatically, via Facebook Messenger.

Why Facebook Messenger? 

For starters, you most likely already have it on your phone, so no need to download a new app to get PayrollHero reminders.  Plus, in many countries (including the Philippines), Facebook Messenger is free, no data required.

What do the reminders look like? 

Good question, here is an example of a reminder. It pops up prior to the shift to remind employees to clock in.

Employee Reminders

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6 New Reports PayrollHero Offers | HR People Analytics

Our loyalty department has been working on some people analytics reports as a way to provide more value to our clients. Our team curates client’s data into a personal, hand crafted experience for the CEO or owner of the company. So far the feedback from our clients have been fantastic. We started with the Employee Happiness Report but have expanded the offering to include five other reports.

Employee Happiness Report – Semantic Analysis of clocking photos to determine the happiness of your workforce and answer questions around how happiness leads to productivity.

Clocking Infraction Report – Analyzes late/early clockings to determine behaviour trends and calculate the cost of infractions.

Resolution Analysis Report – Analyzes automatically resolved clocking infractions vs. manually resolved clocking infractions to determine how to optimize your automated thresholds.

Chronic Non-Clocking Report – Analyzes the hidden costs of employees who do not clock in or out. (resolution time, man hours spent, etc.)

Photo Mismatch Report – Examines clocking selfies to look for signs of buddy punching & other suspicious activity.

GPS vs. Worksite Mismatch Report – Collects all GPS data around clockings to determine who may be clocking in or out of their assigned worksite.7abde1b9-a98c-4858-a8e7-2ef75072fb65

Want to learn more? Reach out to our team to chat anything. Just click on the chat bubble on any of our websites, including this blog. →

 

Top 3 Toughest Aspects of Payroll in Singapore

Assuming Payroll

Often times, companies generate payroll and pay out an entire month’s wages to an employee before the month has ended. We call this assuming payroll. This is how it works: If payroll is generated an the 25th and paid out on the 27th, the manager pays the full month’s wages, up till the 31st, assuming that the employee will make it to work on the last few days. If he doesn’t, the manager Optimizing Work Productivity with Happinessneeds to deduct his wage in the next month

Assuming payroll is an inefficient and inaccurate way of paying employees. We’ve come across many business owners who do it in Singapore. Most of the time, it’s because they have been doing it for years and have never thought about changing the rule. We help our clients transition from assuming payroll to regular payroll which saves clients money and time. Here is a blog post on exactly how to transition from assuming to regular payroll.

Irregular Clock-in Timings

When an employee clocks in at 8.57am instead of 9.00am, the biometric device records it to the exact minute. Your HR manager needs to manually correct the irregularity because coming in 3 minutes early does not mean that the employee will get paid for those extra three minutes.

The PayrollHero app has a threshold feature that solves this problem. An HR manager can set a threshold: if an employee clocks in between 8.55am and 9.05am, their clock-in time resets to 9.00am, automatically correcting the irregularity that your HR manager would have had to deal with otherwise.

Disparate Systems for Time, Attendance, Scheduling and Payroll

payrollhero-benefits-featuresBusiness owners have multiple systems that deal with different HR problems; a biometric device to measure clock ins, a separate Excel sheet that imports data from the biometric device and generates payroll, another Excel sheet that needs to be updated every week with schedules for each employee and a whole other system that employees use to apply for leave. With so many systems to deal with, no wonder an HR manager barely has any time to engage with employees or find innovative ways to overcome Singapore’s labor crunch.

An end-to-end solution that removes any need for multiple devices is exactly what an HR manager needs. PayrollHero allows employees to click selfies on their phone or an iPad in the work site when they clock in. This data is stored in the Cloud and used when payroll is generate by the system. The same app is used when applying for leave or checking schedules for the week. An HR manager can use the app on his laptop, phone or any device with internet connection anywhere in the world and have full control over what is going on at his work site.

While these problems are seen as some of HR managers’ biggest in Singapore, they are faced by managers in the Philippines and pretty much any other place too. Some of the other problems HR managers need to deal with are changing tax laws, a labor crunch and laws against foreign workers in the country.

We hope that this post serves as a solution to some of your biggest HR problems. Do let us know your biggest HR problem and how you are currently dealing with it.

 

Leave Management Custom Leave Type

Custom Leave TypeA few weeks ago, we rolled out our leave management application. After receiving feedback from our clients, we are releasing a new feature to the application – custom leave types.

When an employee is applying for leave, she needs to enter a type of leave – maternity, child care, leave, etc. Previously, we added all the most popular types of leaves that were applicable, as directed by the ministries of manpower (or their equivalent) in Singapore and the Philippines. However, Singapore and the Philippines each have 8 different types of leaves. Moreover, individual companies may record the same leave under a different name.

To make the system more flexible, the app now allows you to set your own custom leave type. Employees may choose from these custom types when they apply for leave. This benefits the manager when there is a change in the rules and leave types are added or removed. It also allows managers to set what leave types are most commonly used by their employees instead of a long list of types that the government has stipulated but no one actually uses.

A manager can add an unlimited number of leave types. Every type must be unique. Leave types can also be renamed at any point of time. Finally, if a leave type is not used anymore, it can be archived and accessed later.

We hope the custom leave type will be helpful and we’d love to hear feedback on it!

The New Employee PayrollHero Happiness Report

Optimizing Work Productivity with HappinessWe recently announced that PayrollHero can generate employee happiness reports for our clients. What does that really mean?

PayrollHero takes in data in the form of selfies that employees have clicked on the app. The selfies are used to evaluate employee happiness by looking for certain metrics and correlating them to other selfies. For example, smiling for photos results in a different set of facial expressions than a serious face.

We know what you’re thinking. What if an employee smiles but isn’t really happy. Faking a smile is not hard and the metrics used to evaluate a real smile are the same as those used to evaluate a fake one. An employee could easily fool the app into thinking that the employee is happy when she really isn’t. Well, faking a smile has its own merits.

A Harvard study showed that a smile – whether fake or real – can be uplifting for one’s emotional well being. Granted, a momentary smile for a selfie certainly does not equate to happiness in life because a smile can be fake; but the act of smiling itself is a positive way to cope with sadness. Our preconceived notion that happiness causes us to smile is not always true. In fact, the reverse of that can work as well. A fake smile may be a better path towards happiness than others. It signals a willingness to stay positive in difficult times instead of suppressing ill feelings.

How does this relate to happiness reports? Well, from a high level, the happiness reports suggest a correlation between smiling and happiness and therefore suggest which employee or work site is the happiest. But with deeper inspection, the reports find a correlation between smiling and employees’ positive attitude. As a manager, you should consider the happiness report as a way of measuring positive sentiments in your workforce.

Finally, PayrollHero can use this data against employee records to find a trend in employee behavior. We can provide insight into whether happier employees are generally more punctual; whether unhappy employees experience a longer commute to work everyday; whether the happiest worksite equals highest earnings. This information is unique to PayrollHero’s data. Companies can leverage on it to make more informed decisions on what it takes to improve their bottom line.

Want to learn more? Contact us to chat further.

 

Top 12 Apps to Help You Run Your Business in Singapore

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Running a business is tough. If you are in Singapore, where the labour crunch is putting a strain on your resources, you cannot be spending time on administrative work.

Leveraging on technology has multiple benefits: you can access your work wherever you go; saving your work on the Cloud means that you have less chance of losing it if your computer crashes; you will be more efficient and less error-prone.

Using apps is the way to go in a place like Singapore where everyone is tech-enabled.

We have brought you 12 apps that can help you run your business:

1.Evernote

Evernote is an app that helps you record text, audio recordings, notes, reminders and pictures on the Cloud. You can access it from any device and it is free up to a certain limit. Evernote also allows you to collaborate by sharing files with other Evernote users.

The app can be used offline and when you connect to the Internet, the app will automatically upload your files to the Cloud. Evernote is a great way to organize your thoughts now, and take action later.

2. Google Apps for Work

If your company is using Gmail, Google Drive is a must. You can share documents, spreadsheets and presentations within the company or among a few members by customizing permissions to files.

While Google Apps for Work is not free, the range of products available to you make the subscription worth your while.

3. Trello

This is an awesome project-based software. It’s free and does away with meaningless sticky-notes, spreadsheets and email chains. Trello is a great app to collaborate and track progress in a project. Trello allows you to integrate with Google Drive, Dropbox, Box and OneDrive.

You can set notifications and make checkists to stay on top of your work. You can also create team to manage people working on Trello. Altogether, Trello makes for a great app that can boost productivity at the workplace.

4. CamScanner

Oftentimes, you need to file and submit forms for administrative work: whether you are incorporating your business or filing taxes. A great way to scan and store your official documents is by using CamScanner.

The app is free and lets you scan documents on your phone. You might be wondering why this is a step up from taking a picture of the document. CamScanner adds filters to the picture and automatically makes it look like a scanned version of the document. You can email the document to anyone as a JPEG or PDF file. You can also just save it on the app and access it online from any device.

5. Tripit

For business owners who travel frequently, Tripit saves your itinerary in one place and lets you access it easily. Tripit also gives you weather updates and maps to your destinations. Tripit is free for a few features like saving your plans in one place, syncing plans with your calendar and editing plans manually.

The paid version allows you to track frequent flier miles and share your plans with friends.

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6. Hipchat

Hipchat is a communication platform for your employees. It is free if you use the basic service where you can have chat rooms based on the functions of your business (marketing, sales, operations, etc). Hipchat is user friendly and only $2 per user per month for the full service. That includes video chat an screen sharing.

7. Rescue Time

This is an interesting app, mostly useful for you as a manager. The app runs in the background and tracks what you are working on. It sends weekly and monthly reports.

This helps you compare what you plan to prioritize on and how much time you are actually spending on a task. The Lite version is free and has limited features. The full version blocks apps that are distracting you and send more detailed reports to measure your productivity.

8. Mailchimp

If you send emails to a list of subscribers, then Mailchimp is a must for you. It is free up to 12,000 emails per month to up to 2,000 subscribers. Mailchimp gives insight into how many people have opened the email, how many have clicked on the links you have sent them and which emails have bounced.

Another cool feature is that Mailchimp integrates with other apps like Google Analytics, Slack, Salesforce and more.

9. LinkedIn

Everyone knows about LinkedIn but how to use it is more important. It is a social networking site for professionals. It is free with limited features. LinkedIn is essential to help you stay on top of the latest events in your field of work. It has a number of groups where people in similar careers discuss opportunities and challenges.

LinkedIn could just be the path towards improving your business or finding new avenues for your personal career growth. It is also a great tool to use while hiring people.

10. Expensify

Expensify is an app that helps you track expenses, scan bills and more. It is a free app that is incredibly useful for a business owner trying to separate personal and business expenses. It also helps your employees to report expenses clearly. The expenses are exported into your accounting software making a seamless transition between different applications.

Expensify integrates with Salesforce, Quickbooks and a host of other software apps.

11. Insightly

Insightly is a CRM software that helps small businesses take charge of the CRM. It has a mobile app and a web app that integrates with Google, Mailchimp and more. Insightly helps you stay on top of leads, partners, vendors and suppliers.

It also gives you reports and data on how your CRM based project is progressing: with data on your sales funnel and forecasts on the closing date for a deal. Insightly is not free but you can sign up for a free trial.

12. Dropbox Business

If you haven’t realized it already, Dropbox is a force to reckon with. You can share, collaborate and store files securely on the Cloud. It is easily accessible on any device. Dropbox helps in collaborating by notifying you on any changes made in documents and saving different versions of the document.

Dropbox Business is not free but offers unlimited storage space, ability to make groups and third party app integration, among other things.

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Conclusion

Most of these apps facilitate teamwork and remove barriers like difficulty in communication, unclear task delegation and poor management of data. What it leaves you with is time to focus on bigger tasks that are more pressing for your business.

These recommendations are also free or with minimal initial investment. We hope they serve you well and we would love to hear about more apps that can improve efficiency in your business!

What Does It Take To Make Remote Work Work?

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As a business owner, you are bound to look towards expanding your business at some point. In which case, you will have multiple offices at different locations. While you are in one worksite, you will want to stay in touch with employees in your other store locations. Staying connected is essential when your employees are spread out over the map. It’s even more important if your employees work remotely and do not often physically meet you or other employees on a regular basis.

Apps

At PayrollHero, we use a number of apps to facilitate remote work. These apps tie our employees together. We use the apps for face-to face interactions and for quick chats instead of spamming employees’ inboxes. The following apps might be useful for your company too:

SlackThis is the center of all our communication through different departments and offices. Slack allows you to create chat rooms and invite people to them. We use this feature to separate different functions of the team: engineering, business development, etc. Slack is also our metaphorical grapevine. We have chat rooms for random news, general musings and articles or books that anyone wants to share with the team. Slack also allows for private chats, thereby removing the need for emails to coordinate work. Slack is flexible in the sense that it has a number of integrations: Twitter, Mailchimp, appear.in.

Appear.in, Skype, Google HangoutsTeams can’t function without face-to-face meetings. Bosses benefit from meeting their employees face-to-face in order to gauge their emotional state and general well-being. The app features and video quality differ but essentially they help you conduct online meetings.

Asana, TrelloTo ensure that all tasks are tracked and accountable to the relevant employees, we use Asana. These apps are built to suit remote work. Asana allows you to assign tasks in a checklist format whereas Trello breaks down work in the form of projects in which tasks are outlined using cards. Both apps can be accessed online. So you or your employee can work from anywhere in the world and still stay on top of things.

Google Drive, Dropbox for BusinessKeeping track of all the documents and sheets created by multiple departments across different worksites is essential. These apps are tailored towards businesses’ storage needs. With a subscription fee, you have access to unlimited storage, data analytics (for Google) and more. Both apps allow you to track who is editing files and what kind of access you want your employees to have for each file or folder.

It’s More Than Just Apps

Making remote work successful is more than having a suite of apps at your disposal. It requires a shift in the way you and your employees think about work. It requires trust in your employees to work even if you’re not monitoring them at the office. We have inculcated some practices that help maintain discipline and structure even when employees work at different locations across the work. Here are some that have helped us:

Morning catch ups: Every morning, at a time suitable to your employees in their respective time zones, each employee summarizes their work in 60 seconds. The format is: what they accomplished yesterday, what they couldn’t complete, what they will do today and roadblocks to completing their work. From the head of the team down to the entry-level employee must be able to summarize their work in under a minute. The meeting is helpful in understanding where the team is going and what can be done to remove roadblocks.

Handbooks: For new employees, or employees that have changed departments, it is hard to catch up to how things are done when the entire department works remotely. Writing down the steps to each task in a handbook and storing it in Google Drive/Dropbox cuts down on confusion and time wasted in connecting with the employee who knows how to do the required task. Handbooks remove any misunderstandings or errors. It is a fool-proof way of ensuring that the business continues in case someone is not available to lend a helping hand.

Slack-logoUsing Slack to integrate the team: While Slack can be used to create chat rooms and do work, it is often a great tool to include everyone on the team and talk about common interests. Our chat-rooms like #random and #general are great spaces for employees to share ideas and talk about things outside of work. It is a place to plan outings over the weekend or share movie reviews. These conversations pull the team together and allow for cross-departmental interaction; something that could be missing while everyone is focusing on work.

Finally, making remote work possible is about using apps to their maximum capacity and reviewing if they work or not. Managers need to be more mindful of their employees. Employees in turn need to make a conscious effort to stay on top of their work because remote work often results in the blurring of personal and professional life. Altogether, making remote work work is hugely beneficial to employees. All it takes is a little tweaking of the way things are usually done.