Payroll Processing

Posted by LauraDerb on March 13th, 2021

In accounting management, a payroll is an electronic list of all employees of a given company which is qualified to get various payments and other additional work incentives and amounts each should get. This is one of the most important elements in any accounting system because it will allow you to know who gets paid what and when they get paid for it. A payroll system allows for the recording and transfer of payables between the employees, the manager, and other parties involved with accounting and payables. In essence, payroll simply records who gets paid, when and how.

This record of every employee's wages and salaries helps the manager to make salary payment decisions thus affecting the overall profitability of the business. In order for a payroll to be completed accurately, it has to be accurate all the time. The reason for this is that there are too many human errors found in an incorrect payroll calculation which will greatly affect your calculations and give a wrong picture of how your business is performing financially.

There are different types of payrolls available in the market such as Payroll by Hour, Payroll by Payroll Date, Pre-Payroll, Deferred Payroll , and Error-Free Payroll. Payroll by Hour is considered as the standard payroll processing method which provides the most accurate results of your payables. This process uses a computer program to generate your payables. Payroll by Payroll Date will be calculated based on your last activity in the current pay period. An error-free payroll processing method uses real-time data to automatically calculate and display the correct payroll amount at the end of the pay period.

Payroll by Payroll Date is considered as the most difficult type of payroll system because it requires manual intervention to make a complete and accurate payroll calculation. The problem is not the difficulty level of the system but more of the time needed to manually perform the task. After all, you have to enter data manually and then run the calculations to derive the payables for that period. You also need to check and verify whether your input data is correct to avoid misinterpretation of your payables. If not, you might end up having incorrect final figures thus ending up being the cause of miscommunication between you and your employees.

Before using Pre-Payroll, you must prepare all pertinent documents such as tax filing statement, W-4 information, unemployment benefits declaration, bank statement, all applicable taxes and a salary sheet of each salaried employee. With the help of an authorized payroll program, you can also incorporate bank reconciliation services in the pre-payroll procedure. However, the accuracy of your pre-payroll procedure is highly dependent on your computer database. The accuracy of the results depends largely on the data entered into the data fields used in the database.

Payroll refers to the employer's method of collecting data regarding individual employees. It includes the computation of all applicable deductions and credits that are applicable per pay period, net salaries and hourly rates of payment, employer's contributions to Social Security, Medicare and Medicaid as well as employer's deductions from the total pay of each employee. Most states in the U.S. allow employers to take advantage of their employees' federal income taxes, disability and health benefits if any applicable. They also allow employers to withhold income tax from their employees' checks and remit the same to the government agencies mentioned. Federal taxes that are withheld by the employer to remain with the employer. Federal taxes that are paid by the employee must be submitted to the government through the paycheck of the employee or through direct deposit.

Payroll Taxes and Filing Options Employers have various options available to them to compute taxes on behalf of their employees. One option is to withhold all applicable payroll taxes from the employee's check and directly deposit the same in the government funds mentioned. Another option is to allow the employee to file for an annual return which covers all the deductions taken by the employer, including overtime pay and fringe benefits.

There are a few things that the employee information provided during the payroll program processing may not always be correct. The accuracy of hours worked cannot be guaranteed. In addition, the computations of deductions may not be correct and may not even be accurate. The payroll program cannot determine the actual amount of salary that an employee receives, or the tax that has been taken out of his/her salary.