This article provides a complete and detailed guide on how to organize a Payroll Management System (also known as a salary system) in a business.
Understanding the salary payment system
A wage regulation is a document developed by a business based on the provisions of the Labor Code and government decrees guiding the development of wage regulations in businesses, and is published and applied within the business.
The wage regulations stipulate wages, wage-related issues, and other payments to employees such as bonuses, allowances, and welfare benefits. This establishes the basis and method for calculating wages for employees working at the enterprise.
Establishing a salary payment system within the company.
In this article, Expertis will guide you through building a salary and bonus system in accordance with the most standard regulations, following these steps:
1. Determine the unit price and planned annual wage fund.
What is a planned payroll fund? Regulations regarding payroll funds and payroll planning. The steps in building a payroll fund are concepts that any business needs to understand before starting operations.
a) What is the planned wage fund?
The wage fund is the total amount of wages that a business pays to all types of labor under its management and employment, including basic salary, allowances, bonuses, welfare expenses, etc., based on the legal framework of the Labor Law and related regulations.
The planned payroll fund is a projected payroll fund that is estimated before the actual revenue and expenditure of the enterprise, based on the current business results and the enterprise's future business objectives. Determining the payroll fund is the basis for the enterprise to decide whether to increase or decrease the number of employees, existing bonuses, and the needs of the enterprise.
b) How to create a planned salary fund
The payroll fund is the total amount of wages paid by a business to all employees under its management and employment, including the following main components:
- Time-based wages, piece-rate wages, and wages based on output.
- Lunch money, shift meal money
- Wages paid to employees during periods of production stoppage, production stoppage due to objective reasons, and during periods of reassignment for training, work, leave, and holidays.
- Overtime pay
- Overtime and night shift allowances
- These types of allowances are of a recurring nature.
- Expenses for employee benefits and allowances: sickness, maternity, work-related accidents, birthdays, weddings, funerals, etc.
To develop a planned monthly and annual payroll budget, the person responsible for planning the payroll budget must understand the company's goals and strategies, be aware of market salary levels, and work with other departments within the company to create a salary scale that aligns with the business objectives, the number of employees, and the bonus increases needed for the coming month/year.
The finance department will use the planned payroll budget to develop the company's expenditures for the coming month/year, ensuring that the total of all necessary expenditures does not exceed the company's budget. At the same time, the person responsible for preparing the planned payroll budget needs to compare the official payroll budget with the planned budget to learn from experience and make improvements for preparing the payroll budget for the following month/year.
2. Establish a system of job titles and spacing coefficients.
It is necessary to list and group jobs with similar characteristics, complexity levels, and responsibilities into a single category. This requires the business to have detailed job descriptions and requirements for each job title.
3. Determine the method for calculating salaries.
Depending on the nature of the work, businesses can apply appropriate wage calculation methods. For example, fixed salaries can be applied to administrative and office staff, piece-rate salaries can be applied to positions directly involved in product manufacturing or revenue generation, or both methods can be applied to the same employee…
4. Establish a system for evaluating job performance, rewarding, and penalizing employees.
To ensure fairness in compensation and motivate employees, businesses need to establish performance evaluation standards, especially for office staff. This requires job descriptions that are relatively realistic, and the planning and monitoring of work schedules in each department and for each individual to be carried out rigorously.
5. Regulations regarding the timing and procedures for calculating and paying salaries, and special policies.
Employees need to be clearly informed about the payroll process and when they will receive their monthly salaries. In addition, regulations should clearly specify when employees are paid for overtime work, company-sponsored training, paid leave, sick leave, maternity leave, etc.
6. Promulgate, apply, and continuously evaluate, amend, and supplement regulations on salaries and bonuses.
Salary regulations should be concise and to the point, and should be disseminated and reviewed by employees before being officially implemented. The clearer and more transparent the mechanism, the higher the morale and motivation of the employees. Salary regulations should not be kept secret or written in a way that is difficult to decipher. While the agreed-upon salary for each employee is confidential, the method of salary calculation stipulated in the regulations must be clear and easy to understand. Employees need to know how the company pays them and what incentive and benefits the company offers them.
Note: The wage payment mechanism or policy cannot be static; it needs to be continuously reviewed, evaluated, and revised to suit the business situation of the enterprise, changes in labor laws, and new requirements.
Sample salary payment regulations
A payroll policy is a comprehensive document that generally outlines a company's wage policy. Different types and sizes of businesses will have different payroll policy templates. Contact us for assistance with a sample payroll policy.