The Complete Overview of Payroll Process

What is payroll?

A payroll is a financial statement of salaries paid to an employee as wages, bonus or deduction. It is given for the work done during a particular period of time which can be hourly, weekly, monthly etc.

The steps involved in payroll processing includes collecting employee time information for a selected time period, managing benefits & deductions, and distributing employee pay for that time period. Most organisations use either a payroll software system for payroll, or else a third-party payroll processing service.

While the summary of payroll processing sounds quite simple, there are many steps that need to take place, before the actual processing work begins.

Employer setup:

During the setup of tax details, you will also set up workers compensation codes which means the pay grades of different employees. For example, base pay grade for an associate cosultant will be different from the base pay grade of a manager.

Employer setup also involves telling the system how many regular hours are in a week and in a day, how long a break is, etc. Also, determine how overtime is calculated and how you are paying for overtime and night shifts etc.

Next, move on to the setup of the earnings, deductions and the benefits which your company offers. Earnings tell the system the different types of salary codes you have available for all employees, whether it’s hourly, salaried, piece work, bonus pay, overtime, etc. Deductions/benefits codes define the benefits your company offers and other deductions for things like travel allowance medical insurance etc.

Tax Filing:

When it comes to payroll, paying employees is one task, but filing payroll taxes for every employee is an extremely important measure that must be accurate and filed on time.

Once payroll is all set up, the job of processing payroll becomes a simple process. The process itself varies greatly among software systems and services, but the main part of payroll processing involves collecting time information for applicable employees, selecting the employees to be paid and then final payment to the employees.