What Is Payroll Accounting? The Ultimate Guide

Payroll accounting allows your team to get an accurate overview of the cost of paying employees. With the right payroll software, you can expand your workforce and cater to businesses of different sizes. To choose the right payroll software for your business, consider your objectives and budget, then choose the solution that aligns with them. Payroll accounting lets you maintain a record of employee costs. This way, you can determine business-related expenses related to labor costs.

Generally, payroll records should be kept for at least three to seven years, depending on the document type. Proper recordkeeping safeguards your business during audits and helps ensure that future payroll calculations are consistent and accurate. For salaried employees, the agreed-upon annual salary is divided by the number of pay periods. Let’s look at the reasons why accurate payroll accounting matters. If you have to fire an employee because they aren’t performing well, then it is essential to know how much you need to pay.

1. Doing so could create bad relationships between you and your employees while also exposing you to legal actions and fines for non-compliance.
2. Each one represents money that your business has to pay out in the future – usually within a short time.
3. You also have to manage payroll liabilities, which are extra costs of keeping staff.
4. Failing to manage your liabilities can lead to serious legal issues.

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Beyond labor, payroll expenses should account for employer taxes, including FICA, FUTA, and SUTA. These expenses are often grouped under “payroll taxes” in the financial ledger, helping distinguish them from gross wages. Omnipresent is here to help your business with all of its global payroll needs. Whatever your needs are, our team of international payroll and compliance experts are here to simplify your global payroll process. When you run payroll, you are taking the steps necessary to pay your employees, and the wages you pay are a type of liability you owe. Employees receive payment for the work they did in a specific pay period, and are typically paid on a weekly, biweekly, semimonthly, or monthly payroll schedule.

What are Payroll Expenses? A Complete Payroll Expense Guide

Get up and running with free payroll setup, and enjoy free expert support. Try our payroll software in a free, no-obligation 30-day trial. Dedicated software is the best way to avoid mistakes when working with tricky financial obligations. That’s why Joist syncs with QuickBooks for easy recordkeeping. FSLA also requires that payroll records be kept on file for at least three years.

If you have staff working in various countries, tracking liabilities can be even more complicated. In this case, you can turn to a global payroll solution provider, like Omnipresent, to manage all aspects of your payroll process, including tracking liabilities. This helps you easily navigate varying local requirements and regulations. If you have a proper payroll system, you can calculate the gross pay and withholdings for each employee automatically. Done right, you’ll be able to get an overview of all payroll-related expenses and transactions. Payroll ScheduleDecide how often employees will receive payment based on their hours worked, job title and services rendered.

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Employers withhold these amounts from employee paychecks and also match FICA contributions. Employers must contribute employer taxes to various tax agencies and third-party benefits providers too. Part of the payroll process is gathering taxes relating to employee wages and benefits and your contribution to them. Then, you will need to hold onto those funds until your deposit date. You do not immediately deposit these with the taxing authority but do so on a date and schedule what is an indirect cost definition specified by the local authority).

Benefits

Payroll accounting includes payroll liabilities as well as payroll expenses. Every business has to record both using the accrual method of accounting. Companies are responsible for managing a range of deductions and taxes, from federal and state income tax withholdings to Social Security and Medicare contributions.

For companies that hire employees, payroll liabilities are a very important part of their expenditure. Understanding how these work and keeping track of them will help you manage your business more efficiently. The dedicated software programs that manage payroll automatically keep track of all the relevant information in one place. It makes processing payroll easier and eliminates mistakes that were common when using manual tracking methods.