It is general knowledge that the heart of every organization is the workforce that generates revenue. To manage high staff turnover and to retain the best hands, implementation of global best practices in relation to human resource functions cannot be overemphasized, payroll management being an integral part.
In this part of the world, payroll management is traditionally perceived as a low risk function and as such accorded minimal attention. However, payroll management has become increasingly complex for employers of all sizes in Nigeria. The Nigerian business environment has been described as one of the most challenging in Africa as businesses are required to obtain several permits/approvals and comply with different laws and regulations.
The compliance requirements provided under the law are extended to workers' remuneration in many areas. Within the current legal framework, employers are deemed to be agents of government for deduction and remittance of taxes and other levies on employment income. This engenders the need for effective payroll management system. Keeping your best hands in relation to salary packages, while at the same time complying with the numerous regulatory requirements can be distracting and tasking.
In this article and in subsequent series, we will be discussing the various regulatory requirements expected of employers of labour, various components of salary packages, and how to ensure a company's payroll is properly managed to achieve regulatory compliance and staff retention.
What is Payroll Management All About?
Payroll management refers to the administration of employees' financial records including salaries, wages, bonuses, deductions, and net pay. It entails the collection of payroll data, computation, disbursement and reporting of employees' salaries and related statutory deductions. It also involves registration with various regulators in relation to statutory payroll-related obligations, such as contributions with respect to pension, industrial training funds, employees compensation scheme, national housing funds, etc.
Interestingly, many of these contributions, while they are added value to the employees and helps in fostering loyalty, can amount to significant avoidable cost increase to employers. In addition, ensuring compliance on a monthly basis could be cumbersome, time consuming and can lead to costly errors, if not properly managed. In certain instances, there are technical complexities involved in computing contributions expected of employers, as is the case with pension contributions.
National Housing Fund (NHF) contributions also potentially impacts employees' net salary, and is often a major point to consider in payroll management. Attracting and retaining highly competent staff therefore demands proper planning and efficient payroll management by organizations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.