The payroll administration involves the necessary steps taken for paying the employees of an establishment. Precisely, it encompasses a series of tasks to prepare and pay employees at the end of the pre-determined and agreed payroll period. The process includes calculating the wages of every employee, tax deductions, checking the number of hours worked by the employee, adding allowances and company benefits, etc. The accounting department generally with a payroll administrator executes all accounting functions related to the record of payroll, social security, hours worked, bonuses as well as overtime payment, says Charles Spinelli.
According to the professional, every company should employ a professional payroll administrator to ensure compliance with the set of regulations involved with payroll systems. The article focuses on the steps for processing the payroll.
Gathering tax information of the employee
The foremost step is to gather the necessary tax information from an employee once he or she joins. The employee needs to provide proper identification and documents related to tax registration to the employer, HR, or accounting manager before getting started. This is important for preparing the accounts in which the deducted taxes are accounted.
Record other information about the employee
The employee needs to fill in different tax forms as per the state rules and provide details of information including name, address, bank details, etc. In general, it is the responsibility of the HR department to collect this information from a new employee and provide them to the payroll administrator. Before processing the first paycheck, the administrator needs to record details about the deductions and benefits of the employee.
Determine the payment schedule
Once all relevant information is gathered to set up payroll, it is important to decide on the payment schedule. For an ongoing company, the payroll schedule remains unchanged, if not otherwise informed anything by the HR department. Mainly there are four schedules including monthly, semi-monthly, bi-weekly, and weekly says, Charles Spinelli. The employees should be informed about the payment schedule at the time of joining.
Calculate gross pay
To calculate the gross pay, the administrator needs to compute the total number of hours worked by an employee which is to be multiplied by the hourly rates. To get the gross pay the allowances and benefits enjoyed by the employee should be included. Then the rules about late attendance and absenteeism should be followed for the necessary deduction.
Calculation of deductions
This should include statutory deductions, deductions against the loan, insurance, etc. it is to be noted that pre-tax deductions include health insurance, contribution to retirement funds, etc. The paycheck amount is derived after the substruction of compulsory deductions as per the federal payroll tax rule.
Disbursal of payment
Finally, after the deductions, the amount of net pay is received which should be paid to each employee. The payment modes may include payment through check or bank transfer to the employee’s personal bank account. The payroll administrator should also send the pay slips with details of deductions, and benefits, including net income to each employee.
Restore all payroll records
Keeping all records of payroll-related transactions is vital for compliance and tax purposes. It is also required in the event of any employee disputes his/her paycheck.
According to Charles Spinelli, in case of any disputes, IRS may require the admin to produce all documentation in due course for scrutiny.
