How to choose a Payroll System in the Philippines

Choosing the right payroll system is critical for a smooth transition and effective execution of the human resources policies. Because not all payroll systems are the same. Besides, changing from one system to another system is tedious. Other than the migration of data and learning how to use the system, the company may also need to update their procedures. Therefore, there are a lot of work involved in setting up a payroll system. Therefore, it is important to choose a payroll system that is suitable for the company.

Payroll System in the Philippines

So, to choose a payroll system in the Philippines, the company needs to understand the flexibility of the payroll system and what are the company’s requirements. A payroll system is basically made up of 5 areas – employee management, attendance management, leave management, payroll processing and reports and analytics. So follow the checklist below to mark out the company’s requirements and check with the payroll system vendors if they are able to meet the company’s requirements.

Employee Management

Employee management is basically the employee’s 201 files. However, a payroll system is only a part of a human resources management system, there may be some features that are desirable but not available in a typical payroll system.

Remarks
Does the company wish to upload employees picture?
Does the company wish to upload employees documents?
Does the company require an employee’s platform (employee e-service)?
Does the company allow online leave application?
Does the company allow checking and printing of payslip online?
Does the company allow employees to self-update their personal details?

Attendance Management

The monitoring of employees’ attendance in the Philippines is required by law as most employees are paid by the number of hours that they worked. So employers need to be able to adjust their employees’ attendance settings in the payroll system to accurately detect the employees working hours including their overtime and night shift differential if any.

Remarks
Can the company change the day factor for monthly salaried employees?
Does the company have shifting schedule?
Are the employees allowed to swap shifts on their own?
Are the managers allowed to allocate shifts?
Do employees have fixed rest day?
Are employees allowed to swap their rest day?
Do managers need to approve the swapping of employees’ rest day?
Are all employees entitled to overtime pay?
Can the company change the overtime pay rate?
Do employees need to apply for overtime pay?
Do managers need to approve employee’s overtime?
Can the company change the night shift differential rate?
Does the company have a grace period for tardiness?
Does the company have a different grace period for different groups of employees?
Does the company deduct employee’s salary for tardiness?
Does the company have flexible work arrangements?
Can the company change the premium pay rate?
Can the company change the holiday pay rate?

Leave Management

Different companies have different leave policies. Therefore the leave management system needs to be flexible enough to accommodate the different leave policies. For instance, the company may increase the number of vacation leaves according to the employee’s number of years of service. If the system is able to detect and apply the policy automatically, then the human resources officer does not need to track it manually.

Remarks
Does the company have an encashment policy?
Does the company have a limit for the maximum number of leaves to encash?
Does the company allow balance leaves to be brought forward to next year?
Does the company have a limit for the maximum number of leaves to be brought forward to next year?
Does the company have a different leave policy for different groups of employees?
Does the company have a leave increment policy according to years of service?
Does the company require supporting documents for leave application?
Do managers need to approve the leave?
Does the company pro-rate the leaves?

Payroll Processing

Payroll processing may be the most standardized component of a payroll system. This is after all supposed to be the expertise of the payroll system vendors. However, not all companies follow the best practices in the processing of payroll. Therefore, there may be some differences in the way different companies process their payroll.

Remarks
What is the employee’s withholding tax on compensation category?
Does the company provide de minimis benefits?
Does the company provide non-taxable compensation?
Is the mandated contribution fixed based on employee’s monthly basic salary?
Is the mandated contribution based on the employee’s monthly gross salary?
Is the mandated contribution deducted every payroll?
Is the mandated contribution deducted every end of the month?
Does the payroll need to be approved?
When does the company pay out the 13th-month pay?
When does the company perform the reconciliation?
How does the company process employee’s final pay?

Report And Analytics

All payroll systems should provide the standard reports for submission to DOLE, BIR, SSS, Philhealth and HDMF. For the required reports, please refer to the respective institution website. However, there are some additional reports and documents that can help human resources staff to be more efficient if these are automated.

Remarks
Does the company provide a standard certificate of employment?
Does the company provide a standard reference letter?
Does the company require a quitclaim deed for separated employees?
Does the company analyze the cost of employees’ tardiness?
Does the company analyze employees’ leave and attendance?
Does the company analyze the demographics of the employees?
Does the company analyze the manpower cost of different departments?
Does the company analyze the manpower cost of different projects?
Does the company analyze the total manpower cost per month, quarter, year?

These are just some of the simple settings that may affect the choice of the company’s payroll system. Companies may also have their own consideration such as the communication between the HR, managers and employees. It is important to go through the requirements and add in the missing ones. Then compare the cost and functionalities of the different payroll system in the Philippines before making a choice.