Month End Glossary

Payroll

Payroll refers to the process of managing employee compensation including salaries, wages, bonuses, and deductions.

Payroll is an integral business process that encompasses the administration of employee compensation. It includes calculating earnings such as wages and salaries based on roles, hours worked, or commissions, deductions for taxes and benefits, and ensuring timely disbursement of net pay. Payroll also involves maintaining accurate records for compliance with legal requirements regarding tax and employment regulations.

For example, a payroll department may process a bi-weekly payroll for an organization by gathering data from timekeeping systems, applying the contractually agreed salary or wage rates, deducting for health insurance and retirement plans, and depositing the remainder into employees’ bank accounts. Businesses also generate payroll reports for financial analysis and reconciliation purposes.

Payroll accuracy is critical, as errors can lead to dissatisfaction among employees or penalties from governing authorities. Modern payroll systems or outsourced providers often streamline this function for efficiency and compliance. Given its interrelation with accounting, having clear guidelines for payroll-related workflows is crucial, especially for activities like month-end close checklists and reconciliations.

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