What Is a Payroll?
Payroll is the primary group of expenses in a business associated with its human resources. Often one of the largest expenses of a business (especially in small to mid-sized businesses), payroll encompasses paychecks, taxation and employee benefits. Payroll as a term is often used to refer to the total number of business employees.
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Extent of Payroll
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Payroll refers to all compensation paid to all employees in a business. Payroll could include everything from hourly wages, salaries, and taxes, to bonuses and vacation payouts. If it's money given to an employee, it's part of payroll.
Non-Compensation Payroll Expenses
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In addition to the compensation paid out to all employees, payroll also includes all appropriate taxes and any voluntary benefit deductions, such as insurance, 401k, or pension plans. Even if compensation is paid to a third-party like an insurance provider, it is still considered a payroll expense.
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Payroll Taxes
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Payroll taxes include federal, state, and sometimes local taxes. Income taxes, social security and medicare deductions, and unemployment insurance taxes are all part of payroll.
Other Payroll Expenses
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Payroll may also include garnishments on an employee's checks or expenses for accumulated vacation time. The cost of hiring a third-party accountant or payroll company to calculate and print paychecks and taxes is also considered a payroll expense.
Alternative Definitions of Payroll
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Payroll can also refer to the complete list of employees in a business or the funds set aside each pay period to be used for paying employees and payroll taxes.
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