What Happens During the Payroll Process?

The payroll process refers to the steps required to pay employees each pay period and involves employees’ hours worked, their pay rate, and deductions. Processing payroll ensures employees are paid based on their employment status and other Department of Labor (DOL) requirements.

The Payroll Process

The payroll process starts after you hire your first employee. Each pay period, employees work and must be paid based on their hours and pay rate. However, before giving the employee a paycheck, you need to process deductions such as state and federal taxes, unemployment, and insurance, as examples.

How to Process Payroll — Manual, Software or Service

How long it takes to process payroll depends on the way you process it. Some small businesses manually track employee hours and earnings on a spreadsheet. That’s both time-consuming and likely to produce errors. Others use free software or an online payroll calculator.

For example, if all your processing is done manually, it may take you a day or so to process payroll for just a few employees. That’s because you have to add up timecards, calculate pay and overtime and process deductions manually. You also have to set aside taxes that have been deducted for each employee, so they can be paid.

Therefore, we recommend using payroll software or a payroll service to ensure that your payroll is processed quickly and correctly based on federal, state and local laws.

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