Payroll Processing Checklist

SET-UP, POLICIES, AND PROCEDURES Collect Employee Information Determine which employees are salaried and which are hourly.

Classify Workers.



Properly classify your workers as full-time employees, independent contractors, or interns.

Tipped employees have other requirements.

  Select a Payroll Software.  
  Procedures to be Implemented The recording of hourly employees’ time, such as time clock or payroll software.
  Cutting checks and direct deposit
  Administrators Determine who has access to make schedule changes and changes to pay rates.
  Setup Pay Calendars Ensure all pay frequencies and earning schedules are scheduled.
  Create Policies For Specific Scenarios

·      for sick days, holidays, maternity leave, vacation pay, and other absences;


·      new hires


·      pay changes and terminations;


·      overtime and bonuses

  Determine if You Need State or Local IDs. Some state and local governments require businesses to obtain ID numbers for processing taxes.
KNOW FEDERAL AND STATE PAYROLL LAWS The employer must comply with the U.S. Department of Labor’s wage and hour standards and the IRS payroll tax regulations. The FSLA says that all employee payroll records must be kept for three years after the date of the last entry.



The IRS requires that employee records be kept on file for four years.
  The Family and Medical Leave Act (FMLA) requires employers with over 50 employees to keep records regarding any employee leave under FMLA.

State unemployment agencies require that employment records be kept for between four to seven years.


Check for state law specifics.

Create a detailed checklist with the specific wage processing tasks for each pay period. Include the steps required to process wages from beginning to end.
  Confirm time card submissions.
  Compute time cards and enter payroll hours into the system. Ensure salaried workers receive regular pay for the pay period.
WAGE PROCESSING Enter any changes to employee payroll data. This includes changes to employee address, deductions changes, pay adjustments (such as raises), and new hire and termination processing.
May also include processing supplemental pay, such as overtime, severance, bonuses and commissions.
DEDUCTION PROCESSING Statutory and Involuntary Deductions

This includes federal income tax, Social Security tax, and Medicare tax.


May also include state income tax.


Includes wage garnishments and child support withholding orders.

The employer must withhold these taxes from employees’ paychecks, as well as for its portion of payroll taxes.
Voluntary Deductions These are offered by the company like retirement and health benefits, life and disability insurance, and charitable contributions.
PAY GENERATION Print Paychecks and Pay Stubs and Make Direct Deposits. Include a pre-processing report to double-check and (if required) correct payroll before printing paychecks
Make a Direct Deposit File. Note delivery of paychecks to a specific person after payroll processing (if designated).
POST-PROCESSING File all relevant data for compliance with record-keeping requirements. Include data for various required payroll reports
  Generate internal reports Those used for Accounting, Finance, Management, and Human Resources
  Generate reports for CPA, legal counsel, or other outside consultants


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