Payroll refers to the total amount of financial records pertaining to the salaries of a group of employees. Within the category of payroll, a variety of subcategories will be present, including wages, bonuses and deductions. The discipline of accounting defines payroll as the sum of money paid out to staff members for services rendered, within a specified time frame.
Payroll is a vital component in companies, as it affects the earnings of these companies. Aside from the cost of labor, payroll affects taxation levels. That’s why most organized and proactive companies take care to hire professional payroll administrators and lower-echelon clerks, in order to ensure that payroll is as accurate as possible. The goal of payroll is to provide proper levels of salary to employees, while also ensuring that all deductions are calculated efficiently.
Keeping a proper payroll will make certain that morale at a company remains high. When accounting errors begin surfacing within a payroll, employees may become very disgruntled. Employees are often paid via direct deposit these days. However, they will always receive paystubs that detail their earnings, deductions and bonuses.
These paystubs are usually carefully examined by staff members, in order to ensure that they receive what they deserve. There is typically a constant stream of communication between payroll staff and employees, since payroll directly affects the livelihood of staff members.
The amount of payroll monies that are put aside for taxes will vary, based on national rules. In American, payroll taxes differ from income taxes, and they are calculated based on salary levels. USA payroll taxes are used to keep certain federal government programs, such as Social Security and Medicare, functioning effectively.
Payroll and income taxes fall within the category of trust fund taxes. Money for payroll taxes will be set aside and then sent into the government on a specified date, rather than being sent it in smaller increments. That is why such monies are considered to be “held in trust”.
How often is Payroll Performed?
The most popular format for payroll frequency is the bi-weekly pay period. Employees will receive new paychecks every two weeks throughout the year. However, every company is different, and certain company administrators may choose to pay with less frequency or with more frequency. Examples of other payroll frequency setups include daily payments, weekly payments, twice-monthly payments and monthly payments. In addition, employers may choose to pay 13 times per annum, once every couple of months, once every thirteen weeks, semi-annually or annually.
These days, in the digital age, many employers trim the costs of performing and administrating payroll, by choosing to outsource the task. Traditionally, payroll was performed by staff who shared offices with the employees of the company. Nowadays, it’s possible to enjoy payroll services that happen remotely. While there are pros and cons to choosing outsourcing, it does offer employers the ability to cut costs. Typically, outsourcing will negate the need to pay payroll staff benefits, since most employers who outsource don’t hire full-time, permanent staff members.
Aside from the daily tasks involved with getting paychecks to employees and making sure that deductions are appropriate, proper payroll requires payroll reconciliation. This process involves making certain that all transactions balance out and correspond to the right accounts. Verification processes will be ongoing, in order to ensure that accounts are in order year-round.
When payroll is completed during each payment cycle, an accountant or clerk will look through all payroll entries in order to determine accuracy. Examples of entries that will be examined include tax deductions, withholdings and overtime. Reconciliation pertains to balancing the entire payroll by making entries to the right cost accounts.
Another method of reconciliation involves verifying the accuracy of earnings. Typically, this is achieved by checking salary levels, overtime amounts and hourly wages, in order to make sure the right amounts are being paid out during each payroll cycle.
There are different methods of payroll reconciliation. Accountants and clerks may use one or all of them in order to ensure accuracy. Companies may have standard practices for payroll reconciliation, or allow staff members to choose the methods that get the best results. Typically, reconciliation will reveal errors that need to be corrected in order to balance the payroll.