Payroll: The Importance Of Distributing Employee Wages

It goes without saying that most employees don't work at their jobs for the fun of it or for the charity of helping out a company in need

. While there is certainly nothing wrong or even unusual about having a job that you like, chances are you want to be paid for your services. Without a good payroll process, it can be difficult to make sure all of a company's employees are paid what they have earned. The term itself encompasses everyone who works for the company and the wages or salary they receive. They may receive this payment in the form of a steady salary, a highly variable wage, or through bonuses and commission. As a manager or business owner, it is your responsibility to see that everyone is paid what they are owed.

Calculating Pay

As part of the payroll process, the owner (or a designated staff member-sometimes an accountant) will need to calculate the total amount that needs to be paid out on a weekly (or sometimes biweekly or monthly) basis. For each employee, this may mean something different. For those "on the clock", it will mean adding up all of their hours and multiplying those hours by the rate at which they are paid. For those on salary, the calculation should be fairly easy; these employees are typically paid the same thing each period. For those on commission, it will mean doing some more advanced calculations depending on how their commission is derived.

Withholding Taxes

Of course, in most jobs, it is up to the employer to take out taxes before giving the paycheck to the employee. Once the person in charge of payroll has calculated the gross income, they must then deduct the amounts applicable to the employee. This will include taxes, FICA, medical insurance, and anything else that is specific to that worker. The remaining amount is what goes into the final check and is then forwarded on to the employee. For even someone with an advanced accounting degree, this can get overwhelming, which is why many companies have chosen to outsource their payroll to an outside company.

Covering Checks

You won't run into any shortage of opinions when it comes to determining the most important aspect of owning a business. Certainly, however, near the top of the list is being able to cover payroll. If you get to a point where cash flow is short enough that it can't cover the employees' wages, there is a big problem. Employees may like you and may like working for your company, but they aren't going to work for free. Keeping enough money in the bank to cover the checks is a vital aspect of running a business.

by: Anders Abadie

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