No one gets into business to run their payroll or to keep up with regulation. There’s just other pressing challenge to be solved; finding the right product, target customers, location, go-to-market strategy and so on. However, things like bookkeeping, accounting, payroll..those still have to be done right otherwise your business may look great from the outside but when it’s time to hit the road, it would stall almost immediately.
So, for this post, we are going to look at payroll for your small business and what you should look out for when planning to invest in one.
But first, here’s a quick checklist/ summary of the post that you can go through then dive deeper into the post to read the reasons as to why these are the qualities of a great payroll solution for your business;
- Local focused – build for the Kenyan market/ market you are operating in
- Completely error free
- Is online
- A platform – incorporates different functionalities under one roof and allows you to save time
- Affordable – takes into account your cash flow
- Automatic updates
- Employee focused
- Allows for an audit trail – has payroll reports
It is the right tool for the right job – local focus
Payroll systems are not new to this world. Neither are they new in Kenya. With access to the internet, there’s a myriad of online solutions to choose from where we can process our payrolls. What is not readily available, are localized systems. Systems that actually get the job done right.
A typical payroll in Kenya includes addition of commissions, deductions, allowances and other benefits for your employees. It then involves the calculation of tax deductions like PAYE, NHIF, NSSF, NITA, HELB, Withholding tax among others. Half of these, most of us either do not know we are meant to be submitting and those that know, have no idea how to get them done.
An off-the-shelf solution from the internet will probably get you to the addition of the various payroll details and preparing the payroll but none will enable you to do submissions for your taxes. Your ideal payroll solution should be able to handle everything including submitting your local taxes (and showing you which ones you should submit in cases where you don’t know) and it should do this without making you have to figure out the nitty gritty of what goes on in the back-end. It should be able to automate your entire payroll from start to finish in a timely, updated and quick manner.
It increases payroll accuracy and is error free
Quite a number of Kenyan businesses are still using manual excel sheets to run their payrolls. Excel sheets by all means are the cheapest way to do this especially if you are using a pirated copy of Microsoft Office. One obvious challenge that come with this is the human error associated with making manual calculations. Some errors in a business are forgivable but not tax related errors. Those ones come with a cost. A legal and financial one.
Late filing of tax returns attracts a penalty of 5% of the tax due or 20,000KES whichever is higher. Late payments of taxes leads to a penalty of 20% of the outstanding tax.
These are some of the headaches that as a business owner, you don’t need to deal with and they are challenges that your payroll solution should be able to cater for. All calculations should always be 100% error free and updated according to the law.
It is online
A true Kenyan business owner probably has 3 other businesses on the side or a full time job. It is just how we do things. For this purpose, we cannot afford to be at multiple places at the same time but your business does not know this, it still demands your attention.
Herein comes your online payroll solution. The bliss of being able to run your entire payroll, send your employees their payslips, submit for NHIF, NSSF, PAYE, NITA, HELB at the comfort of your desk, at home, on your mobile phone is an essential convenience. Online systems via the internet, have the ability to “talk” to other systems allowing you to be able to accomplish multiple tasks on a single platform. An option that is not available on any foreign solution in the Kenyan market, neither do you get that convenience with an offline solution.
It saves you time
Anyone who has been involved in preparing the payroll of a company in Kenya understands the intricacies involved in the preparation of the payroll. First there’s accumulation of the payroll data, then the processing of the data and submission of the various reports required by the government. This is a task that could take anything from a full day to a couple of days.
A modern payroll solution incorporates all these processes into one single solution. It allows you for continuous update of data throughout the month and then takes care of the rest at the end of the month. Obviously you have to click a button or two here and there but that is all there should be for the user. The data that you have fed should be enough for it to figure out the rest based on the payroll/HR/ tax laws of the country. A process that could take you days, now, is accomplished in a matter of minutes, saving you a tonne of time that you could use to actually run your business and not lose sleep over your payroll.
It is affordable now and in the long run
Internet expenses in Kenya are still on the higher side and adding a payroll solution which is online to your monthly expenses might not seem like the best idea. The alternative however, is twice as expensive. Offline payroll solutions in the market cost anything from 70,000KES to 600,000KES depending on a variety of things like number of users, licenses and so on. If you can afford that then this post is definitely not for you.
Your startup/ small business payroll solution should accommodate your fluctuating cash flow and thus offer a subscription model where you can pay a small fee to start and keep paying this small fee for continued access. In other words, it should be cheap and should have a monthly subscription model where you can pay when you actually have money and when you are using it. This means that if the solution stops working for you, you can just stop using it. You pay for the service received and not the type of business you run.
It has continuous and automatic updates
In the last 5 years, there’s been changes in payroll/ tax laws in Kenya more than we have ever seen in the history of this country. Tax relief has gone down twice, income tax brackets have been adjusted, NHIF have changed their rates and NSSF still haven’t decided whether they are accepting their new rates (3 years old now) or their old rates.
Most of us are not tax experts but all these changes affect us and if you are running a business, these are things that you actually have to be aware of and effect on your payroll.
Whichever payroll solution you choose, it should cater for all these changes. Your payroll solution should be extremely up to date, it should also allow you to run back-dated payrolls with the correct details of the time/ month and it should cater for conflicting scenarios like the NSSF case.
For example, if NSSF rates in June are 400KES and in March they were 230KES, if you are running March payroll in June, you should get 230KES and not 400KES and you should not have to make the adjustments yourself. Your payroll solution should just know the times have changed and it should change with the times. That is the convenience you are paying for.
It leave an audit trail
Your payroll expenses are part of your overall company expenses and they do affect the financial standing of your business. It is one thing to get the preparing of the payroll and submissions right but you also need to account for the money spent on your payroll.
This means that you payroll solution should include a variety of payroll reports that can allow you to be able to balance your books at any one point. These reports should at least include an accounting report that shows you which figures are part of the balance sheet and which are for the income statement and a monthly overview report that gives you the full picture of how your monthly payrolls are. Both these reports are very good when it comes for forecasting and budgeting for your business.
It takes care of your employees
Employees now want to be in control of their calendars and work days. They need to be able to plan their vacations, easily update their emergency contact information, check their payslips when making financial considerations or access them when applying for visas (when planning their vacations). And they want to do all this at their own convenience without their employer necessarily getting involved.
Free flow of information between the employer and employee makes for a happy company.
This is why your payroll solution should have a unique portal for your employees to see all their payslips, current and past and have the ability to download and print them. They should also be able to see how many leave days they have spent during the year, how many they have left and be able to request for leave right on their mobile phone on their personal profile/ portal. These are some of the next level service that you should be looking for when shopping around for a payroll solution for your business.
Regardless of which solution you choose, at the end of the day, make sure you get value for money and you are not caught on the wrong side of the law. Ignorance is no excuse. There’s a lot of information out there about running your payroll and there’s a number of good solutions to source from. A great one that I could recommend is Payroll.Ke. Check it out and let me know but be effective, be sharp and use solutions that make your business grow.