What Everybody Should Know About Payrolls

If you are an ordinary employee making your day to day living for a company, it’s an undeniable fact that you are always looking forward to the time when you would get your monthly salary.  Chances are, it is in the form of a pay slip.  You would get it after duly signing a payroll.

Well, what is exactly a payroll?  For the uninitiated, it is the sum of all financial records of salaries, wages, bonuses and deductions.  From afar, it is nothing more than a hodgepodge of accounting terms meant to confuse the ordinary folk.  However, upon closer inspection, it is actually an essential document of any firm because it holds the key to its financial health.

Let us look into its components one by one.  First, we have the paycheck.  Traditionally, it is a paper document given out by the employer to his employee for services rendered. Of course, the value of each paycheck varies with the designation or position of the employee.  High ranking officers get more than laborers or clerical staff.  Nowadays, especially in developed countries like the United States of America, Canada and Australia, the physical paycheck has been replaced by the more modern electronic direct deposits to personal bank accounts.

It is common knowledge that different levels of the bureaucracy, such as the federal or national, state and provincial, and local agencies require employers to accomplish numerous payroll functions like withholding amounts from employees’ compensation to cover income tax, social security fees and Medicare charges.  These amounts being withheld by employers from their employees’ are popularly called as trust-fund taxes because they are held in a special trust account by the government.  For the amounts being withheld by state and local income taxes, they are also held in trust by their respective state and local governments.

Next we have the pay slip. It may also be referred to as a pay stub, paystub, pay slip, pay advice or paycheck stub.  It is a significant document that an employee receives from gis employer, either through a direct deposit or as part of their paycheck.  It usually details the gross income and all taxes and any other permutation of deductions such as the ubiquitous retirement plan contributions, health and life insurances, garnishments and all other charitable contributions subtracted out of the gross value to arrive at the final net amount of the take home pay. In addition, it may also include the year to date totals in some special circumstances.

The third component is the payroll card.  It is an unavoidable fact that some employees, for one reason or another, do not have an easy access to a bank account.  It could be due to a bad check history or maybe they are not in close proximity to any bank.  The solution to this common problem is offered by a lot of Payroll Service Providers.  So this time, instead of receiving a check which the employees can encash for a rate of 5-10%, they can have a direct deposit poured into a so-called debit card.  In this situation, the company saves on costs because they don’t have to print out checks anymore.  They won’t have to worry also about check frauds due to a lost or stolen check. This system is highly convenient because the card can be used at any accredited automated teller machine in the area.  It is usually a single account in the employee’s name.

These are the important things you should know about payrolls so that the next time you receive your monthly salary, you won’t be confused as to how much you receive or where your money goes.