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What is Payroll?

Michael Pollick
By
Updated May 16, 2024
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The term "payroll" encompasses every employee of a company who receives a regular wage or other compensation. Some employees may be paid a steady salary while others are paid for hours worked or the number of items produced. All of these different payment methods are calculated by a payroll specialist and the appropriate paychecks are issued. Companies often use objective measuring tools such as timecards or timesheets completed by supervisors to determine the total amount of compensation due each pay period.

After a payroll accountant multiplies an employee's hours by his or her pay rate, the gross income amount is entered into a calculator or computer program. Regular deductions such as tax withholdings, medical insurance, union dues, charitable contributions and so on are then categorized and subtracted. The remaining balance is then converted to a check or electronic deposit and becomes the employee's net pay for that time period. In the US, payroll departments also identify the employer and employees by a federal code and keep a running tally on total income and deductions for the fiscal year.

For small business owners, keeping enough cash to pay all employees is often one of their highest priorities. Even if the business itself hasn't become profitable, employees must still be compensated for their services. This is why many smaller companies prefer to keep their payroll obligations as low as possible until they've reached a certain level of profitability. It's not unusual for small business owners to forgo their own salaries in order pay their employees.

Setting up an effective payroll system is not especially difficult for trained accountants, but it can be very time consuming. Some smaller businesses rely on user-friendly computer software to set up a simple system complete with check printers and file storage. Larger companies may assign trained accountants to handle pay issues as part of their overall duties. Businesses without the means to maintain their own systems often choose to farm out this task to outside specialists.

Since payroll records are based on objective criteria such as timecards and federal tax forms, outside accountants can perform all of the calculations, store all of the year-to-date data, and issue pay in a timely fashion. Employers simply need to update these companies with any changes in employee pay rates or deductions.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Michael Pollick
By Michael Pollick
As a frequent contributor to SmartCapitalMind, Michael Pollick uses his passion for research and writing to cover a wide range of topics. His curiosity drives him to study subjects in-depth, resulting in informative and engaging articles. Prior to becoming a professional writer, Michael honed his skills as an English tutor, poet, voice-over artist, and DJ.
Discussion Comments
By anon341714 — On Jul 14, 2013

What is offline payroll? I need the definition and its structure.

By anon297167 — On Oct 15, 2012

Can anyone recommend the best payroll software for use in Singapore?

By anon212153 — On Sep 05, 2011

This is Tanyi and I am preparing for HND in Accounting and have been asked to prepare a report on payroll. So I need some information regarding this payroll, like what does payroll actually mean, what does it contain and how to prepare a report. How should the questionnaire be prepared, etc.? Please, I need your help.

By anon198495 — On Jul 20, 2011

i need a payroll accounting project.

By anon179612 — On May 24, 2011

I am looking for a real payroll system that can exist in a bank. --ciamar

By anon159689 — On Mar 13, 2011

can you give me at least three specific problem in a payroll system? and what are the advantages and disadvantages of swipe cards? thanks

By anon144377 — On Jan 19, 2011

A payroll is just a title. It's amazing how people are obtaining degrees and don't even have common sense. This article has more than enough information for people of understanding.

This is my third semester in my final year of my associate degree, majoring in international business management. If you have jobs, I'm doing my best to take you out of that chair. I'm taking your job! Thank you for not letting me get intimidated now when I get to the work force.

By anon143866 — On Jan 18, 2011

Can you please provide information on different types of payroll systems and also recommend a system to use and why do you think i should use that particular payroll system? Thanks in advance, Anna.

By naresh — On Dec 22, 2010

what is payroll, how can we calculate and tell me the process.

By anon123366 — On Nov 01, 2010

The company I use to work for started out really small. Each week they'd hand us personal checks at the end of each week instead of payroll checks. But since then things have taken off and we now have direct deposit.

By anon123149 — On Oct 31, 2010

This is janardhan. can i have complete information of payroll system and how it works?

By anon122481 — On Oct 28, 2010

This is joya. I am a computer science and engineering student 4th semester from national university of Bangladesh. Can you give me solution of this question elaborately? What is payroll? What is the advantage of this system? can you give me some examples of this system? Thanks.

By anon115432 — On Oct 02, 2010

I'm a business management technology student. And we are assigned to make a project proposal about payroll systems and it's hard for me to figure it out. Will you help me?

By anon106702 — On Aug 26, 2010

I have to do some work for my thesis. i need some information about a payroll system. Our thesis is about to code a program of the payroll system of the LBC company. In your own understanding what is a payroll system?

By jiege — On Aug 20, 2010

I'm jiege and I'm a bsit student. i have a project about payroll. can you give some information or ideas on how to do it?. Thanks. I'm waiting for your help.

By anon103814 — On Aug 14, 2010

I'm a business management technology student. Can you teach me how to make a payroll system?

By anon101403 — On Aug 03, 2010

I'm jherwin, and it student. It's so hard to do a thesis, especially on a payroll topic. Please help me.

By anon97277 — On Jul 19, 2010

I'm Jane, a BA student. i wish to write a project on how a payroll system works. would you please give me the necessary guidelines to it. thank you.

By anon91002 — On Jun 19, 2010

this is prasanta. I am working for a small company. i just want to know the payroll system.

By anon85836 — On May 22, 2010

Please tell me how payroll works as an hr function.

By anon83921 — On May 13, 2010

I am jaswanth, pursuing my mba. can you provide for me the complete illustration about payroll system?

By anon83407 — On May 10, 2010

its me ashwini. I am studying master of business information and technology final year in my university. i need to do a project on payroll so may i get the payroll project?

By anon80052 — On Apr 26, 2010

can you give some examples in doing payroll system?

By anon77320 — On Apr 14, 2010

this is pavani studying mba fourth semester. i need a project related to hr(payroll). Please would you provide me? its a peak position for me. Please help me.

By anon75890 — On Apr 08, 2010

i need a project on pay roll system.

By anon70118 — On Mar 12, 2010

Can you please give the review of related literature about payroll? and specific problem of payroll using manual? Thanks a lot and more power.

By anon69931 — On Mar 10, 2010

can you give me an ER diagram of the payroll system?

By anon66661 — On Feb 21, 2010

I need a project on payroll.

By anon65628 — On Feb 15, 2010

what does payroll mean? does every company have to maintain this payroll expert?

By anon63881 — On Feb 04, 2010

please can you give me a thesis of a payroll system? i am in my second year in computer programming and i hope you will help me.

thanks and god bless.

By anon61016 — On Jan 17, 2010

could you give me a basic table of a payroll system? and space it correctly so that i could understand. Thanks! bunz.

By anon59759 — On Jan 10, 2010

i'm a computer science student. can you teach me how to make a payroll system and give some examples? Thanks.

By anon59059 — On Jan 06, 2010

how do I make a thesis in payroll system? --anne

By anon54388 — On Nov 30, 2009

I work as a lecturer in college. i just want to know what is actual pay roll, and whether employees get the salaries on bench or not.

By anon49864 — On Oct 23, 2009

please, i need your help on my project topic, "Developing a web base for a payroll of a company using a basic program."

By anon48334 — On Oct 12, 2009

can you give some example in doing payroll system?

By anon48045 — On Oct 09, 2009

what is a payroll system and a company payroll.

By anon45453 — On Sep 16, 2009

This is Santosh. I'm pursuing my MBA 2nd semester from matrusri pg college Hyderabad. My specialisation is in human resources. As i need to do a project to gain practical knowledge, I chose my topic as payrolls. so i need some information regarding this payroll i.e., what does payroll actually mean, what does it contain and how to prepare the report, how should the questionnaire be prepared etc. so please help me regarding my project. waiting for your reply.

By anon43702 — On Aug 31, 2009

I want to write a field report on payroll so I am asking for your assistance on introducing it.

By medishetty — On Aug 07, 2009

Hi this is anil. i am working as an hr recruiter. i am interested in pay. can anybody suggest how to handle pay roll process?

By anon38877 — On Jul 29, 2009

hi. this is shivaraj. I am working for a small company. i just want to know the payroll system.

By anon24901 — On Jan 20, 2009

How can a payroll be motivational?

By anon19672 — On Oct 17, 2008

how to make an introduction of a payroll system?

By anon19659 — On Oct 16, 2008

So payroll and accounting & human resources are supposed to work together? I'm twisted...I'm doing research for school.

By anon19565 — On Oct 15, 2008

what is payroll system and how it works?

By anon14455 — On Jun 17, 2008

What is a payroll system?

By anon13415 — On May 27, 2008

This is Santosh. I'm pursuing my MBA 2nd semester from matrusri pg college Hyderabad. My specialisation is in human resources. As i need to do a project to gain practical knowledge, I chose my topic as payrolls. so i need some information regarding this payroll i.e., what does payroll actually mean, what does it contains and how to prepare the report how should the questionnaire prepared etc. so please help me regarding my project. waiting for your reply...........

By nobreather — On May 26, 2008

even though a small business owner can figure out how to do payroll on their own, i think using a payroll service is a worthwhile idea.

in our state, there is lots of paperwork that needs to be filled out at different times of the year, and the small monthly fee that payroll services charge seems worthwhile.

outsourcing this sort of task allows you to focus on your business instead of focusing on things outside of your expertise.

Michael Pollick
Michael Pollick
As a frequent contributor to SmartCapitalMind, Michael Pollick uses his passion for research and writing to cover a wide...
Learn more
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