What Is a Payroll Procedure? How to Create a Payroll Process Flowchart

by Danni White - August 13, 2019
Danni White

Danni White | Danni White is the Director of Content Strategy and Development at Bython Media and the Editor-In-Chief at TechFunnel.com, a top B2B digital destination for C-Level executives, technologists, and marketers. Bython Media is also the parent company of OnlineWhitepapers.com, BusinessWorldIT.com, List.Events, and TheDailyPlanIOT.com.

What Is a Payroll Procedure? How to Create a Payroll Process Flowchart

Process flowcharts can be extraordinarily helpful tools. By having the steps to complete laying out in front of you, it can save you a ton of time. Even if it is a task you carry out consistently, there can be days when your mind does not work as well as others. Additionally, if someone else needed to fill in for you, having a documented flow chart can ensure that tasks get completed correctly.

A payroll process flowchart is just one flowchart that can simplify work. By setting your payroll procedure and plugging the steps into a payroll flowchart, there is no need for payroll employees to have to think about what to do. To create an effective flow chart, you must first create a payroll process flow. Most likely, there are already certain steps that you are aware need to be complete, but below are steps you want to be sure are included regardless of if your company completes payroll manually or digitally.

Steps to consider for Payroll Process Flowchart

1. Input New Information

A payroll system revolves around employee information. Therefore, the payroll department must be sure to input any and all information that it is given. Most of this information will come when the company hires a new employee and needs to set them up in the system. However, there are times when information must be updated such as if an employee changes their last name or address, or if an employee changes his or her bank. Inputting all new information should be the first step in the process to ensure that everything done subsequently is done correctly.

2. Gather Timecards

You must have the information regarding the employees’ time worked to process payroll. Gathering timecards- physical ones or digital ones should be the next step in the payroll process flow. At times, there will be additional information such as bonus information or paid time off information that will need to be gathered at this time.

3. Update Any Information

You must be sure that any additional information is updated here. This might include pay raises, promotions, a change in benefits, or other company-induced changes. If these changes are not entered prior to calculating checks, you will likely find yourself with extra work on your hands from having to fix mistakes.

4. Begin Calculations

A large part of payroll procedure calculations is calculating the hours and wages of an employee. However, there are many other things that must be calculated. Below is a list of the most common calculations that payroll must process:

-Social Security and Medicare
-Any Other Deductions- such as uniform expenses
-Additional Payments- i.e. bonuses

5. Print/Distribute Paychecks and Reports

Once calculations are complete, you are ready to distribute checks on payday, as well as the reports associated with them. The exact reports and the way in which they are distributed will differ depending on the system. For instance, if you pay your employees with a physical check, the reports will be different than if you pay through direct deposit. Additionally, you might simply make the pay statements available online or you might print them out and manually distribute them. However, you choose to do it, reports and pay statements still need to be distributed in some fashion.

6. Record Payroll in a General Ledger

It might seem that the cycle is complete once employees are paid, but that is simply not the case. A very important part of the payroll process flow is recording the payroll details. You might choose to write it in a physical ledger or type it up in a digital one. Either way, you must keep a record of wages, deductions, benefit contributions, withheld taxes, and other details to protect yourself and your company.

7. File and Pay Taxes

The taxes that have been calculated and deducted from employees’ paychecks must then be paid to the necessary government authorities. This is not a once a year tasks like filing taxes. It must be completed during each payroll period. It would be a very good idea to document where these taxes needed to be sent to and have it close by. This way, you do not have to search for the information when you need it and you minimize the possibility of mistakes.

Completing this process manually can be time-consuming and close to impossible if there are a lot of employees. However, there are ways to simplify it. Outsourcing your payroll procedure is always an option. Using software programs, providing only direct deposit, automating time tracking, and providing reports only online are additional ways to simplify the payroll process flow. By meeting with HR and payroll leaders, you can determine what are the most time-consuming tasks and decide how to simplify them. Then, as a team, you can create a payroll procedure and payroll flowchart that can benefit everyone.

Danni White

Danni White | Danni White is the Director of Content Strategy and Development at Bython Media and the Editor-In-Chief at TechFunnel.com, a top B2B digital destin...

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