What is Payroll?

Payroll is the compensation a business must pay to its employees for a set period or on a given date. It is usually managed by the accounting or human resources department of a company. Small-business payrolls may be handled directly by the owner or an associate.

Payroll can also refer to the list of a company's employees and the amount of compensation due to each of them. 

Payroll is a major expense for most businesses and is almost always deductible, meaning the expense can be deducted from gross income lowering the company's taxable income. Payroll can differ from one pay period to another because of overtime, sick pay, and other variables.

Payroll is the process of paying a company's employees, which includes tracking hours worked, calculating employees' pay, and distributing payments via direct deposit to employee bank accounts or by check. 

However, companies must also perform accounting functions to record payroll, taxes withheld, bonuses, overtime pay, sick time, and vacation pay. Companies must put aside and record the amount to be paid to the government (SARS) various other taxes such as PAYE, UIF, and the Compensation Fund.

Many companies use software solutions to manage their payroll. The employee inputs their hours worked through an attendance register or API and their pay is processed and deposited into their bank accounts.

Many medium- and large-size companies outsource payroll services to streamline the process. Employers track the number of hours each employee works and relay this information to the payroll service. 

On payday, the payroll service calculates the gross amount the employee is owed based on the number of hours or weeks worked during the pay period and the pay rate. The service deducts taxes and other withholdings from earnings and then pays the employees.

Summary

• Payroll is the compensation a business must pay to its employees for a set period and on a given date.
• The payroll process can include tracking hours worked for employees, calculating pay, and distributing payments via direct deposit or check.
• However, companies must also perform accounting, record-keeping, and set aside funds for Medicare, Social Security, and unemployment taxes.
• Companies can use professional services and outsource their payroll or use cloud-based software if they do not want to do it themselves.
• Calculating payroll involves many components and can be complex.