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Every employer needs a designated payroll administrator to manage payroll. Whether the payroll is paid by a payroll administrator within the organization, or an outsourced company is used to fulfill payroll, every company, big and small, needs to administer payroll. That is why there is an excellent demand for payroll administrators.
What is Payroll?
Payroll is the process of paying employees their weekly wages regularly. It includes a list of paid employees and each employee’s total payment. A payroll system helps the payroll administrator pay the right amount of money to employees on the correct date.
What is the Payroll Process?
The payroll process involves a calculation of total earnings minus withholdings and payroll taxes. Payroll is processed according to the hours worked, wages paid, worker classification, and benefits deducted from the paycheck.
What Does a Payroll Administrator Do?
A payroll administrator makes sure an organization’s payroll process runs smoothly. To do this, they must accurately record hours worked, pay employees correctly and on deadlines, and comply with tax laws.
Keep Proper Records
The payroll administrator will need to keep accurate records. This includes when a new employee is hired and when they are promoted. The payroll administrator will have the employee fill out proper paperwork, including the W-4 Form (W-9 for contractors), which includes the employee’s personal information and information about tax withholdings. Full-time employees will receive a W-2 at the end of the year reporting payroll activities, whereas the contract will receive form 1099.
The payroll administrator must also keep accurate records of benefit contributions and reimbursements. Some employee pay may go to health insurance, 401K plans, or life insurance. A payroll administrator must also manage Health Savings Accounts and insurance-related reimbursements.
Proper records will include the following:
Manage Employee Withholdings
Employees declare withholdings based on dependents and other tax factors. During the year, an employee may change their withholdings. This can adjust the pre-paid tax amount taken out of their paycheck. It is up to the payroll administrator to educate the employees about how their withholdings will affect their paychecks.
Educate Staff on Salary and Benefits
Payroll administrators provide information and answer employee questions about payroll matters. An employee may wonder if there are any annual changes to medical benefits or how many PTO days they have taken or if they are considering a vacation. It is up to the payroll administrator to explain the salary and benefits during an onboarding meeting when they are first hired. They can also review with employees when benefits change or if they receive a raise for organizational advancement.
Time Tracking
The payroll administrator must accurately track time to pay the employee the proper wage. This can include both digital and physical time clocks. Contractors may submit their hours with an invoice at the end of a pay period.
Gross Wage Calculations
Payroll software helps a payroll administrator accurately calculate gross wages. This includes their wage, hours worked, and commission. They must calculate both hourly and salaried employees accurately.
Deducting Proper Taxes
The payroll administrator must process payroll taxes and deductions. Accounting software like QuickBooks is a great way to automate the process. The following are some of the taxes that are deducted from employee paychecks:
Working with HR and IT
The payroll administrator falls under the human resources (HR) department. They will work with HR to coordinate payroll and benefit distribution. The payroll administrator will also work with the information technology (IT) department to manage and update payroll software that supports their tasks. Small businesses will use software like QuickBooks, while larger organizations may use home-grown payroll software.
Updating Employees on the Payment Process
Many organizations offer employees either paper checks or direct deposit. The payroll administrator may obtain banking information to implement direct deposit, so employees receive paychecks directly to their bank account. Also, the payment procedure may change if the organization adopts a new payroll software. Some employers still use timecards, and the payroll administrator must educate employees on proper clock-in and clock-out procedures.
What are Some Common Payroll Terms?
There are many terms that a payroll administrator must understand. These terms include:
Gross Wages – the total amount of an employee’s compensation before deductions.
Net Pay – the amount an employee takes home after deductions.
Payroll Taxes – the amount federal and state agencies deducted from an employee’s gross wage.
Pay Stub – an itemized list of the gross wages, deductions, and net pay.
Pretax Deductions – the deductions taken out of the gross wage before taxes.
Post Tax Deductions – the deductions taken from the employee’s pay after taxes are deducted.
Why is Payroll Important?
Payroll is an essential part of doing business. The federal government regulates it, and employers who make mistakes in payroll may incur fines.
The Largest Expense
For most businesses, payroll can be the most significant expense. Completing payroll correctly ensures that employees are paid the right amount and on time, plus the business is paying the necessary taxes required by law.
Payroll Regulations
Companies must abide by payroll regulations and laws. The payroll administrator must be familiar with these payroll regulations to avoid fines by the IRS or other federal and state agencies.
What are Payroll Regulations?
Payroll processing is regulated by the Internal Revenue Service (IRS) and the Department of Labor (DOL0. Some of the laws a payroll administrator must abide by include:
Fair Labor Standards Act (FLSA)
FLSA focuses on nonexempt employees’ ability to be paid a minimum wage and overtime pay. Managing time tracking and attendance to pay overtime wages is part of the law. Records for nonexempt workers must be meticulous and include hours worked each day and week, overtime worked each week, date of payment, and total wages paid.
Federal Insurance Contributions Act (FICA)
FICA requires payroll administrators to deduct Medicare and Social Security benefits from employees’ gross earnings. The employer is also responsible for matching these deductions.
Federal Unemployment Tax Act (FUTA)
This act requires employers to contribute to the federal and state unemployment programs to compensate employees who lose their jobs. However, it is not an employee deduction but a percentage the employer must pay, considering exemptions.
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