Payroll is the amount of money an employer pays its employees over a given period, and payroll accounting is the accounting that takes place during this process. Payroll accounting involves calculating the total amount an employee earns, called his or her gross income, and subtracting taxes and other deductions. The end result is the employee's net pay, or the actual amount of the paycheck he or she will receive.
Payroll taxes are taxes mandated by the government on an employee's earnings. They include federal income taxes, state and local income taxes, and social security and Medicare taxes. Other deductions that may be withheld from an employee's paycheck include benefits offered by the company medical insurance premiums, dental insurance, and 401(k) contributions.
In smaller companies, a payroll clerk may be responsible for adding up employee hours and calculating paychecks, or the company may choose to enlist an outside accounting firm for assistance. In larger companies with complex accounting or multi-state payrolls, payroll accountants work with both the payroll or human resources and accounting departments to ensure that everything runs smoothly.
The payroll accountant is responsible for maintaining the accounts related to payroll, deciding to open new accounts or making changes to existing accounts, maintaining records of disbursements in a payroll ledger, performing internal audits, preparing government reports and acting as a liaison with the Department of Labor and providing any information they request. The payroll accountant may supervise a payroll staff and be responsible for ensuring that they can tackle any issue that arises.
Payroll is an essential component of any well-functioning business, and a payroll accountant must be able to keep track of many different elements at once. While regular accounting involves every financial concern of a business or individual, from property to inventory to investments to taxes, a payroll accountant deals specifically with employee pay. Payroll accounting involves working closely with the human resources or payroll departments, while other areas of accounting are largely contained within the accounting department. Because of this involvement with multiple departments, payroll accounting can be a challenging but stimulating role.
Many accountants will encounter payroll accounting at some point in their career trajectories. Serving as a payroll accountant at a large company is a dynamic position with vital responsibilities. It allows plenty of opportunities for leadership and growth. Even outside of a payroll accounting position, though, many accountants at general accounting firms will encounter some form of payroll accounting in their work, through smaller companies that choose to enlist outside help for managing their payroll needs. As payroll is such a vital function of any business, any accountant will find that some general knowledge of payroll accounting will be a handy addition to their arsenal.
- "Accountants and Auditors," Occupational Outlook Handbook (2012-13 Edition), Bureau of Labor Statistics
- "Definition of Payroll Accounting," Jennifer VanBaren, eHow
- "Payroll Accounting," AccountingCoach
- "Payroll 101: What is Payroll?," Intuit