Explaining the Payroll Process

Employees' Wages

The most important step in payroll processing is ensuring that employees are paid correctly and on time. The first step is to calculate the hours submitted by either the employee or his supervisor. This is oftentimes done through time sheets and sometimes spreadsheets. Either way, there should be some form of documentation showing what to pay the employee. Most payroll runs includes regular, overtime, vacation and sick hours. Additionally, there may be benefits to be paid or deducted from the employee's check, such as 401(k) contributions and health benefits.

Taxes

Taxes are a crucial part of the payroll process. All employees and employers are mandated by law to pay federal, state and sometimes local taxes. Failure to do this on time or at all, results in hefty fines or imprisonment. Employers are also required to file state and federal (941s) quarterly taxes. Taxes are deducted from the employee's check during the payroll run, while most employers pay their taxes immediately after each payroll closes. Payroll processing also involves the issuance of W2s to all employees, which reflect the workers' taxes deducted for the entire year.

Record Keeping

Maintaining a structured, payroll record keeping system is key to a successful payroll system. Many companies utilize a payroll software, which stores all the payroll data for every payroll run. This includes payroll reports that list employees' payment history and personal information, such as addresses and Social Security numbers. Additionally, most companies keep back-up files of payroll data in case the software malfunctions.The payroll process also involves assisting employees with concerns they have regarding their paychecks or the payroll in general.

References

• About Payroll