How to Complete Payroll
Payroll is a necessary task; employers must pay workers for time worked, accurately and on time. Failure to provide employees with proper pay can result in penalties from the U.S. Department of Labor. Consequently, the employer must ensure that it understands payroll laws and apply them accordingly. Payroll is a process; if the payroll is manual and includes few employees, it can take a couple of hours to complete. But if the payroll is large, particularly with multiple pay frequencies, it can take a few days to complete. Regardless of the size, there is a standard procedure to completing payroll.
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Instructions
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Pay hourly workers based on your timekeeping system. Most employers have their hourly workers punch a time clock or complete a time sheet; according to the DOL, either method is fine as long it is correct and complete. Pay regular hours (up to 40 hours for the week) at the employee's regular pay rate and overtime hours (above 40 hours) at his overtime rate. Calculate the latter at 1½ times his normal pay rate.
Do not pay hourly workers less than the federal minimum wage--$7.25 per hour, effective July 24, 2010. The only exception is if the employee qualifies for the Youth Minimum Wage of $4.25 per hour. Employees under 20 qualify for this rate during their first 90 calendar workdays, as long as such employment does not displace other employees.
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Compensate salaried workers as normal. A salaried worker's pay normally stays the same unless he has a pay adjustment, such as a pay raise, or a deduction changes, such as a change in federal income tax withholding. To figure the salary for each pay period, divide the number of annual pay periods into the annual salary.
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Withhold and deduct payroll deductions. This includes federal income tax, state income tax (if necessary), Social Security tax and Medicare tax withholding. Furthermore, deduct wage garnishments (if applicable) and all voluntary deductions, such as medical, dental and life insurance, and 401(k) contributions.
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Double-check the payroll before printing paychecks and before generating the direct deposit file. Ensure that all wages and deductions are properly calculated. Make the necessary changes.
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Print paychecks/pay stubs. If applicable, generate direct deposit file and send electronically to the bank--the procedure varies by payroll software. Call the bank and ensure it received the direct deposit file properly.
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Tips & Warnings
After payroll processing, print payroll registers that show employees' gross to net earnings for the pay cycle. Ensure that the appropriate departments receive the necessary reports. For instance, forward payroll registers and payroll tax reports to the finance/accounting department, if applicable. Keep the IRS Circular E (see Resources) for the appropriate tax year handy; it helps you to understand payroll tax laws and compliance regulations.
References
Resources
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