Payroll Definition: Payroll can be defined in three different ways
1. Payroll refers to the employees you pay, along with employee information.
2. Payroll is also the amount you pay employees during each pay period.
3. Or payroll can refer to the process of actually calculating and distributing wages and taxes.
The Components of Payroll:
1. Gross Wages
The total dollar amount paid to the worker, before any deductions. The items listed below are deducted from gross wages to arrive at the worker’s net pay. Gross wages may include commissions, bonuses and other payment arrangements.
2. Benefits
Your company may provide health insurance, retirement plans and other benefits to workers. While your business pays some of these costs, a portion of the benefits may be deducted from the employee’s gross wages. Many of these deductions are taken out of pay before taxes are calculated.
3. Social Security and Medicare
You must deduct the employee’s portion of Social Security and Medicare payments from gross wages. Your employees may have additional deductions that are required by federal or state law.
4. Tax Withholdings
The employer must withhold the employee’s share of federal and state income taxes from payroll. Depending on the location, the company may also need to withhold local or city income taxes from payroll.
The amount of money the employee actually receives in their paycheck is known called net pay.
1. Payroll refers to the employees you pay, along with employee information.
2. Payroll is also the amount you pay employees during each pay period.
3. Or payroll can refer to the process of actually calculating and distributing wages and taxes.
The Components of Payroll:
1. Gross Wages
The total dollar amount paid to the worker, before any deductions. The items listed below are deducted from gross wages to arrive at the worker’s net pay. Gross wages may include commissions, bonuses and other payment arrangements.
2. Benefits
Your company may provide health insurance, retirement plans and other benefits to workers. While your business pays some of these costs, a portion of the benefits may be deducted from the employee’s gross wages. Many of these deductions are taken out of pay before taxes are calculated.
3. Social Security and Medicare
You must deduct the employee’s portion of Social Security and Medicare payments from gross wages. Your employees may have additional deductions that are required by federal or state law.
4. Tax Withholdings
The employer must withhold the employee’s share of federal and state income taxes from payroll. Depending on the location, the company may also need to withhold local or city income taxes from payroll.
The amount of money the employee actually receives in their paycheck is known called net pay.
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