How Does Employee Payroll Work?

Three basic components of employee payroll

Written by Steve Thompson

Many small business owners struggle over the issue of employee payroll. Who should handle it? What is the best way to ensure accuracy? How does the process really work? As your most valuable assets, your employees deserve the best service you can provide when it comes to employee payroll checks.

How Does Employee Payroll Work?

There are three basic components to the issue of payroll: time, taxes and checks. Employee payroll checks cannot be cut until the first two are calculated, so it is important to consider all steps in the process. Other factors include insurance, retirement, garnishment and employee expenditures (such as uniforms).

First, an employee's time is calculated, which is of particular importance if he or she is paid hourly. Any missed days not covered by vacation or sick time will need to be subtracted from a full-time salary, and any overtime hours must be added.

Next, taxes are calculated and subtracted from the gross pay, and a check is finally cut for the remaining amount.

Should You Hire a Payroll Service?

Employee payroll can be greatly simplified when small business owners use HR services that will automate the process. These services might be based only, or they can be part of a software package. There are also HR companies that process payroll for a multitude of clients.

Many small businesses use payroll services because it eliminates the need for a dedicated HR department. You don't have to worry about the accounting on your end because it is already handled, and all you have to do is add or subtract employees from the system as needed.

How Is Employee Information Maintained?

Whether or not you use a payroll service, it is essential that meticulous employee records are kept. Each time a new employee is added to the system or a terminated employee is removed, the changes should be reflected in all records.

Additionally, you will need to keep records of raises, demotions, changes in tax bracket and other alterations. For example, if an employee decides to take advantage of an insurance program, that money will need to be taken out of his paycheck every pay period.

Updating and maintaining employee payroll should not be difficult if you use an HR service. You will simply go through the program's step-by-step process to change information, and it will be reflected in all future paychecks.

How Are Checks Distributed?

The last bit of employee payroll info you need to know involves the checks themselves. How do employees receive their payment?

In some cases, you will be able to print payroll checks directly from the HR service you use. For example, in web-based programs, the system will calculate everything for you, and you just need to click the "print" button. In other cases, paychecks will be mailed to you by the service, or you can set up direct deposit.

Are you ready to get employee payroll services for your business? Submit a free request for price quotes and get matched to multiple dealers who will try to get you the best deal.

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