How A Payroll System Works

By Author: Particia Eyer
Total Articles: 20
Comment this article

Payday is the most anticipated date in a month for most people. This is the day when a worker reaps the fruit of one's labor. Moreover, first payday is one of the most memorable moments for a worker. The feeling of receiving one's hard-earned money is extraordinary.

The first time you received your pay slip, you probably wondered how your net salary was computed. The amount you received was not the same as the agreed salary amount in your contract. This is because you are not familiar with the payroll system. You might have not been informed about the deducted amount in your salary for taxes and contributions to government agencies.

Every company relies on a payroll system to pay their workers accordingly. Payroll functions are carried out by the payroll department. The payroll department deducts a certain amount in your gross salary for federal tax, as well as for state and local income taxes. Other withheld taxes are social security tax and Medicare tax. These amounts are generally called deductibles. The amount of salary minus the deductibles is called the total net salary.

Your total net salary is dependent ...
... upon work performance and other factors, such as attendance. Hence, incurred absences and undertime are deducted from your total gross salary. The payroll officers keep track of your attendance through attendance machines and programs. A payroll outsourcing provider coordinates with the company managers in overseeing employee attendance.

In the United States, a payroll outsourcing provider and an in-house payroll officer update a company's list of employees on a regular basis. They accomplish an information sheet and a tax form and submit them to a government office. A tax form indicates an employee's qualified allowances in payment of taxes. A head of the family has a fixed allowance based on the number of dependents.

Moreover, a payroll outsourcing provider archives the forms of all employees for future reference. These include personal information, bank information, and account number. All information in the employees' record and archive are highly sensitive. Hence, payroll systems are secured by a vow of confidentiality. Nonetheless, employees are exempted from the confidentiality of their salary computation. This is the reason why you are given a pay slip every pay day. Every payroll officer is required to disclose salary information to each employee.