Payroll processing is a multidimensional task that an employer must perform. The employer must comply with the United States Department of Labor’s wage and hour standards and the Internal Revenue Service’s payroll tax regulations. Additionally, it must meet its state payroll requirements. Having a payroll processing checklist helps to ensure compliance.
The checklist should include the wage processing tasks for each pay period. This includes all the steps necessary to process wages from start to finish. If there are multiple pay periods, such as biweekly and semimonthly, prepare separate checklists for each pay cycle to avoid confusion. For example, if all hourly workers are paid biweekly and all salaried employees are paid semimonthly, separate checklists would be needed since both pay groups are processed differently.
The wage processing checklist can include steps to confirm time card submissions, time card computation and entering the payroll hours into the system. It should include a step to ensure salaried workers receive their regular pay for the pay period. Additionally, it should include making changes to employee payroll data, such as address and deductions changes, pay adjustments, such as pay increases and voiding checks, and new hire and termination processing. It also can include processing supplemental pay, such as overtime, severance, bonuses and commissions.
Payroll deductions include statutory/involuntary deductions. The latter means that the deduction is legally binding. Statutory deductions include federal income tax, Social Security tax and Medicare tax, and in most instances, state income tax. The employer is responsible for withholding these taxes from employees' paychecks. Furthermore, it is responsible for its portion of payroll taxes. The checklist should include the required statutory deductions. Statutory deductions also include wage garnishments and child support withholding orders. Include them on the checklist, if applicable.
Voluntary deductions are those that the company offers, such as retirement and health benefits, life and disability insurance, charitable contributions, parking fees, union dues and loan repayment. The checklist does not have to list each voluntary deduction type, but it should include checking for voluntary deductions. Once the payroll representative becomes familiar with the payroll, it’s easy to know which deductions affect which employees.
The checklist should have steps for printing paychecks and pay stubs and generating the direct deposit file. Include a step for printing a pre-processing report, which allows the payroll representative to double-check – and if necessary, adjust – the payroll before printing paychecks and before generating the direct deposit file. Additionally, if the paychecks should be forwarded to a specific individual after payroll processing, indicate this on the checklist.
Once the payroll is processed, the relevant data must be filed to ensure record-keeping compliance. The checklist should state the different payroll reports that must be filed. Additionally, it should include the necessary reports for related departments, such as accounting or finance and human resources. If further interaction is required with these or other departments, include it on the checklist. For example, if an outside tax company handles the company’s payroll tax affairs, the checklist should include how to forward the payroll tax files to the tax company.
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