A payroll is a company’s list of its employees, but the term is commonly used to refer to:
- the total amount of money that a company pays to its employees
- a company’s records of its employees’ salaries and wages, bonuses, and withheld taxes
- the company’s department that calculates funds and pays these.
Payroll in the sense of “money paid to employees” plays a major role in a company for several reasons.
From an accounting perspective, payroll is crucial because payroll and payroll taxes considerably affect the net income of most companies and because they are subject to laws and regulations.
From a human resources viewpoint, the payroll department is critical because employees are sensitive to payroll errors and irregularities: Good employee morale requires payroll to be paid timely and accurately. The primary mission of the payroll department is to ensure that all employees are paid accurately and timely with the correct withholdings and deductions, and that the withholdings and deductions are remitted in a timely manner. This includes salary payments, tax withholdings, and deductions from paychecks.
Businesses may decide to outsource their payroll functions to an outsourcing service like a Payroll service bureau or a fully managed payroll service. These can normally reduce the costs involved in having payroll trained employees in-house as well as the costs of systems and software needed to process a payroll. Where this may reduce the cost for some companies many will foot a bigger bill to outsource their payroll if they have a special designed payroll program or payouts for their employees. In many countries, business payrolls are complicated in that taxes must be filed consistently and accurately to applicable regulatory agencies. For example, restaurant payrolls which typically include tip calculations, deductions, garnishments and other variables, can be difficult to manage especially for new or small business owners.