Finnish payroll accounting and essential functions in an accounting software
Hallaperä, Rina (2017)
Haaga-Helia ammattikorkeakoulu
2017
All rights reserved
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2017053111264
https://urn.fi/URN:NBN:fi:amk-2017053111264
Tiivistelmä
In our contemporary world, as all our social benefits and to a large extent the very basis of our social structure is based on taxation, payroll administration is consequently very strictly legislated, thus requiring easily usable tools. This practice-based thesis was commissioned by SimplBooks OÜ, an Estonian company that provides an accounting software designed especially for small and micro-sized companies. The emphasis of the thesis is limited to the wages module and routine-natured employee wages. The objective of the commission was to define and describe the necessary developments for the Finnish market.
Modern financial management uses applications to process and record transactions and provide information. Nowadays, these applications are mostly digital i.e. data enables immediate further use and run accounting processes as automatically as possible. Though, with projects like the incomes register Katre, Finland is already moving towards real-time management in which digital data is shared immediately with stakeholders through portals.
Payroll accounting process is part of financial management and counts and records personnel costs. Routine-natured wages consist of monetary compensations for work known as monies and fringe benefits paid in goods. They are subject to withholding and thus are the base for calculating income tax. Employee’s pension and insurance contributions are redacted in connection with payroll calculation. However, the employer to make a considerable contribution towards the employees’ pension and unemployment insurances in addition to employees’ gross wages and additional allowances. The same policy applies also to employer’s health, accident and life insurance contributions. These employer’s side costs will significantly add to the overall personnel costs. In digital payroll accounting, the calculation process relies on automated accounting entries and calculation formulas together with data migration, which allows accurate financial reporting. The mandatory payroll documents include three kinds of statutory documents, and employers are also required to fill in statements for the Finnish Tax Administration and insurance companies.
Qualitative methods were used to gain a better understanding of the subject. Three other applications were observed to determine the essential functions, and the author observed one filling process of annual employer statements to supplement the theoretical knowledge.
In conclusion, the essential payroll functions with Finnish employee wages are as follows: support for progressive taxation, automated calculation for both employee’s and employer’s contributions, editable calculation rules, creating documents with statutory content and both calculating and recording payrolls correctly and as automatically as possible. The result of this thesis is an independent report with development propositions for the commissioning party.
Modern financial management uses applications to process and record transactions and provide information. Nowadays, these applications are mostly digital i.e. data enables immediate further use and run accounting processes as automatically as possible. Though, with projects like the incomes register Katre, Finland is already moving towards real-time management in which digital data is shared immediately with stakeholders through portals.
Payroll accounting process is part of financial management and counts and records personnel costs. Routine-natured wages consist of monetary compensations for work known as monies and fringe benefits paid in goods. They are subject to withholding and thus are the base for calculating income tax. Employee’s pension and insurance contributions are redacted in connection with payroll calculation. However, the employer to make a considerable contribution towards the employees’ pension and unemployment insurances in addition to employees’ gross wages and additional allowances. The same policy applies also to employer’s health, accident and life insurance contributions. These employer’s side costs will significantly add to the overall personnel costs. In digital payroll accounting, the calculation process relies on automated accounting entries and calculation formulas together with data migration, which allows accurate financial reporting. The mandatory payroll documents include three kinds of statutory documents, and employers are also required to fill in statements for the Finnish Tax Administration and insurance companies.
Qualitative methods were used to gain a better understanding of the subject. Three other applications were observed to determine the essential functions, and the author observed one filling process of annual employer statements to supplement the theoretical knowledge.
In conclusion, the essential payroll functions with Finnish employee wages are as follows: support for progressive taxation, automated calculation for both employee’s and employer’s contributions, editable calculation rules, creating documents with statutory content and both calculating and recording payrolls correctly and as automatically as possible. The result of this thesis is an independent report with development propositions for the commissioning party.