How to Run a Payroll Process

The process of running a payroll is a detailed one, and involves strict deadlines. Once a company has a payroll processing system in place, it generally stays the same, changing only when new applications are inserted. Here's how to run the payroll process smoothly, ensuring that your employees get paid in a timely and accurate manner.

Instructions

1. Gather the necessary timesheets and hours to pay each employee. Calculate hourly/salary pay, vacation, personal and sick time, plus benefits deductions (401k, health, dental, cafeteria plans and garnishments). Process new hires, terminations and any tax adjustments.

2. Double-check what you've entered before running the payroll. Compare what was submitted to you against what you entered before performing the check run. Once a check run is completed and the payroll is closed, the only way to correct an error is to void the check and issue another. This is why double-checking and even triple-checking is so important in payroll processing.

3. Generate the necessary payroll reports and compare what is printed on each check against the reports. These reports contain a detailed listing of what you entered before the check run was completed. This allows you to catch any mistakes that may have occurred during the payroll processing, before the employee receives his paycheck.

4. Ensure correct quarterly reports (941s) and W2s by reconciling the results of each payroll. Immediately after printing and double-checking the paychecks, ensure that the appropriate federal and state taxes were deducted and balances with the necessary reports. At year-end, the employee's gross wages, benefits deductions and taxes should coincide with each pay period's report.

5. Close the payroll. Any issues resulting from a specific payroll run--after it's been closed and after the employee receives her check--is addressed upon notice. At that time, you can make the necessary adjustments. Depending on the severity of the error, you can correct the error immediately or on the next payroll run.

Tips & Warnings

• Consult with the appropriate party on any questionable information submitted. Be responsive to employees' questions regarding the payroll.

References

• Creating a Payroll System

Resources

• About Payroll Administration