What Is Payroll?
Payroll refers to the process of paying employees, calculating earnings, and deducting payroll taxes.
The Payroll Process
What does payroll entail, exactly? There are several components to payroll and payroll processing.
- Gathering employee information: Before an employer can even pay an employee, they need to have accurate documentation.
- Calculating pay: Employers need to calculate an employee’s gross pay. Gross pay is the total amount of pay the company owes the worker before any deductions. This is also referred to as pre-tax earnings.
- Subtracting deductions: Payroll deductions refer to any funds removed from the employee’s payslip and includes tax deductions. Payroll deductions can also include court-ordered wage garnishment, which often refers to when an employee has to pay child support or repay debt, or non-mandatory contributions, like union dues.
- Income tax withholding and reporting: This refers to withholding taxes from an employee’s salary at the correct tax rate. This is essential in remaining compliant with local tax regulations.
- Tracking employee hours: Payroll may also include tracking employee hours during each pay period. This is vital for employees that receive an hourly wage.
- Calculating overtime pay: Calculating overtime is dependent upon the country and company’s overtime laws and policies.
Managing payroll on a global scale comes with many administrative tasks and compliance risks. Each country has different regulations surrounding payroll, especially when it comes to social security contributions and tax obligations.
Due to the complexities surrounding international payroll, many employers choose to outsource their payroll and work with a global payroll provider. Borderless, an EOR, can help with that. Book a demo today.
