How to Prepare Payroll in a Company

Employees must be paid for the work they do; therefore, payroll is essential to all companies. Some companies outsource their payroll to a payroll company; others hire an in-house payroll staff. Regardless of who is assigned to do the payroll, it is important that it is prepared timely and correctly.

Instructions

Preparing Company Payroll

1. Make all payroll changes. This includes address changes, taxes changes (e.g., exemption amounts), name changes, benefits changes (e.g., 401k and health premium amounts), pay increases or decreases and any adjustments from prior payrolls.

2. Calculate regular, vacation, and sick/personal hours for all hourly employees. This information can generally be found on the employee's time sheet. Pay these hours at the employee's regular (standard) pay rate.

   Check salaried employees' pay, which should remain the same unless there is a pay adjustment (e.g., pay increase or prorating a salaried new hire or terminated employee's pay).

3. Pay overtime hours for hourly employees as listed on the time sheet. Overtime hours should be paid at time and a half. For example, if the employee's regular pay rate is $12 per hour, her overtime rate is $18 ($12 x 1.5).

   Pay double-time hours at twice the employee's standard rate. For example, if her regular pay rate is $12 per hour, her double-time rate is $24 ($12 x 2).

4. Ensure that new hires and terminations are properly calculated. Hourly new hires and terminated employees are paid their exact hours worked. If a salaried employee was hired after the pay period start date or if he was terminated before the pay period end date, you may need to prorate his salary. To prorate a salaried employees' pay, determine his daily rate by dividing his annual pay by 52 (weeks) then dividing the total by 5 (days).

5. Ensure the proper taxes and deductions are calculated from each employee's check. Most companies use payroll software, which makes these calculations. Run a payroll register to ensure that taxes and voluntary deductions (e.g., health and pension) are being deducted at the correct rates.

6. Double-check all wages from the payroll register. Make any necessary corrections. Note: once the payroll is closed, any changes relating to the current payroll has to be manually adjusted on the next payroll.

7. Print paychecks/stubs. If the company offers direct deposit, transmit the direct deposit file through the payroll system. Call the bank to ensure the file has been received before closing the payroll.

References

• Prepare Departmental Payroll