There are many things you should know when it comes to making sure your employee’s paychecks are done correctly. According to the U.S. Department of Labor, workers must be paid in a timely and efficient way. In addition, the Internal Revenue Service (IRS) requires companies to hold federal payroll taxes from employee wages. Payroll processing involves duties related to meeting statutory regulations and paying employees for their services.


Payroll Processing Basics:

  • Payroll System – Payroll processing can’t happen without a payroll system. A payroll system is the method used to process employee payroll. What’s the perfect system for you? Well that depends on the size of your company and the difficulty level of the payroll. When payroll is processed by hand, that is referred to as a manual system. This should only be used if your payroll is extremely small since the system has a high risk for efforts. A computerized or electronic system uses software to process payroll. This simplifies the process. Many employers are also choosing to outsource payroll to a payroll service provider. This company would handle all items related to payroll processing.
  • Preparation – Prior to processing payroll, representatives check to make sure all data required to process payroll has been gathered. This can include timecard collection, payment and deduction system input, direct deposit information, etc. This must all be done in advance of processing the actual payroll.
  • Keeping Track of Time – Since hourly employees are paid according to hours worked, keeping accurate track of their time is an important part of payroll processing. In addition, such calculations depend on the specific payroll system you use. For example, with a manual system, employees use standard time sheets or time clocks to track hours. This would require manual calculation for the time card. On the other hand, a computerized system allows payroll hours to be imported into the payroll software and then the system calculates the time. If payroll processing is outsourced, hours can be uploaded to a system via the Internet. Hours could also be e-mailed or faxed.
  • Payment Accuracy – The person in charge of processing payroll for your company must also make sure workers are being paid according to statutory requirements. For instance, employees must be paid no less than the state or federal minimum wage. He or she is also responsible for making sure people are paid correctly—including salary and supplemental pay (such as bonuses, commissions and overtime). The proper deductions (payroll taxes, wage garnishments, health and retirement benefits, etc.) must also be maintained.
  • Paychecks– Following actual payment and double checking to make sure all payments and deductions are properly handled, the person responsible for payroll may also need to print paychecks and pay stubs and create a direct deposit file. If using a manual system, the designated person must hand write or print out paychecks. Payroll registers must be filed. The manual system requires hard copy filing and the internal computer system saves all payroll data.

Modern Business Associates is an HR company that focuses on payroll and HR outsourcing. We routinely work with client on effective payroll processing. As a Professional Payroll and HR outsource organization, our clients rely on us to help them effectively deal with these kinds of topics.