payroll

Payroll is the process by which an organization compensates its employees. It encompasses calculating gross wages, salaries, bonuses and overtime, applying deductions to determine net pay, and distributing pay and pay stubs on a regular cycle. Payroll is typically aligned with the payroll period, such as weekly, biweekly, semimonthly, or monthly.

Key elements include gross pay, deductions for taxes (federal, state, local), Social Security and Medicare contributions, unemployment taxes, and employee benefit contributions (health insurance, retirement plans, flexible spending accounts). There may also be garnishments and reimbursements. At year’s end, employers generate forms such as W-2s to report earnings and withholdings.

Process and systems: Payroll can be managed manually or with payroll software, or outsourced to payroll service providers. Core tasks include collecting time and attendance data, calculating tax withholdings and benefit deductions, issuing pay, and remitting payroll taxes to authorities. Employers also file required payroll tax returns and provide employees with pay statements. Compliance with wage-and-hour laws and tax regulations is essential.

Governance and scope: Payroll relies on accurate recordkeeping, internal controls to prevent fraud, and data security. Retention requirements vary by jurisdiction. In larger organizations, payroll systems often integrate with human resources information systems and accounting systems. Global or multi-jurisdictional payroll adds complexity due to different tax rates, reporting requirements, and benefits rules.