Payroll Process: Money from Your Employer to Your Bank Account

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The payroll process seems confusing and frustrating from an outside perspective. As an employee, all you want is to get paid, but you may not know what's going on behind the scenes. After all, anytime there's a money issue at work, doesn't your boss tell you to take it up with HR? Although the Human Resources Department is responsible for handling discrepancies and similar matters, it's up to the Payroll Department to get the money you earn into your bank account. Take a peek behind the curtain to learn about the payroll process.

Initial Paperwork

Every employee must fill out paperwork when they're hired. Most of those forms have something to do with the payroll, at least nominally. For example, you have to complete payroll forms for medical insurance, as well as W-4 tax forms. Because you might have to deal with deductions for insurance and other things, it's essential to have this data on record from the beginning of your employment.

Time Card Verification

Not every job requires a time card, but many still do. Punching a time clock is one way for the payroll department to keep track of how many hours employees work per day, per week, and per pay period. If you scan a badge at work or fill out a time sheet, this is why. The payroll staff then must verify all the information on your time card. They're checking for mistakes, such as employees who clock in or out at the wrong time. However, they're also keeping an eye out for time-wasters and suspect information. Since verification is often done with a computerized system, supervisors often manually double check the data just to make sure everything is on the up-and-up.

Summary of Wages Due

The summary doesn't seem notable because it's literally just a summary of the hours you've worked multiplied by your rate of pay. At jobs where overtime occurs, the summary is more critical. The review also includes any bonuses, shift differentials, and changes to wages that took place between the last payroll period and the next one. It's a way to make sure that employees aren't cheated out of extra money, and neither is the company.

Notable Changes

During the payroll process, the staff — or computer program — keys in any employee changes, as well. This is often an employee-driven process, in that, as a worker, you might ask to change the tax exemptions listed on your paycheck, which have to be fixed and rectified before your next payday. You can also take this opportunity to note any pension or medical deductions. It's vital to keep payroll up-to-date with your information to save you some frustration.

Taxes and Deductions

The payroll department is responsible for calculating the taxes that come out of your paycheck. Some companies rely on tax tables supplied by the IRS and deal with withholdings manually. Others use software or a third-party accountant to figure out what's coming out of your check. Your taxes vary for several reasons, including how much you've earn up to a particular point, your wage level, and how many tax allowances you've already had. Payroll also deals with wage deductions. Deductions can be either involuntary or voluntary. Involuntary deductions typically apply to union dues and garnishment of wages. For instance, through a court order, you might have money taken out to pay for loans in default, back taxes, or overdue alimony or child support. Voluntary deductions usually have to do with medical plans, insurance, and pensions. You'll be happy to know that payroll also keeps an eye on how much you owe vs. how much you've paid, especially for garnished wages. That way, staff knows when to stop deducting money from your paycheck.

Payroll Register

To help both employees and payroll staff, all your salary information goes into a register, an essential payroll form. It contains the summary of your wages, as well as any deductions. The purpose of the register is to create a record of your payment history, which then goes into the company's general ledger. Both you and the business can use the register to compile taxes and reports. It's also valuable to research tasks, time spent on them, and redundancies.

Getting Paid

Employees are typically paid in one of two ways. Usually, they have a choice and can decide to be paid by check or direct deposit. Some places only offer one or the other. Regardless, payment is part of the payroll process — the most important part, at least to the workers. The Payroll Department either prints checks, which may be mailed or handed out at the office, or deposits money directly into employees' bank accounts and sends out notifications. From that point, there's still a lot to be done by the payroll department, such as updating the ledger, depositing the taxes withheld from employees, and issuing reports on a government level. Did you know that so much goes into you getting paid for your hard work?