Definition of Payroll
Payroll is the total compensation that you pay to employees during each pay period. It is also referred to as the process of calculating and distributing wages and taxes.
What Is a Payroll Composed Of?
A payroll comprises of the following parts:
The first step is to collect all the relevant employee information which is usually accessible via the W-4 form. This form is filled by every employee when they are hired and provides details of an employee’s tax withholding along with their name, address, and social security number.
If you have employees who are part-time or hourly, then you have to keep track of the number of hours they work so that you are able to calculate the correct amount they are paid.
On the other hand, if you have salary employees, you again have to keep track of their time in order to ensure that they are completing their hours.
Keeping a track of employees’ time off is another integral step. It is important to determine if the time off offered by the employer is paid or unpaid.
Salaries and Wages
Salary is the fixed amount you pay to an employee. Typically, an employee is given an annual salary divided by the number of pay periods in a given year.
Wage, on the contrary, is based on the number of hours worked. To determine this you must know how many hours an employee works for and then multiply it with the hourly rate.
As a manager, you should know if your employees are working overtime. If so then you must figure out how many hours and pay them accordingly.
There is a long list of benefits that one should consider such as insurance, retirement, employee discounts, etc.