What is payroll processing?


Hello, Total Solutions blog! My name is Jessica and I joined the Total Solutions team at the end of 2020 and work with accounting and payroll clients. Prior to my time at Total Solutions, I worked as an accountant and payroll specialist in several different fields including fitness, food service, hospitality, and non-profit.

Most business owners have a lot of questions about payroll. It is one of the essential business functions, but it can also be a confusing process if you’ve never done it before. I am going to walk you through some common questions and fully answer the question ‘what is payroll processing?’

Let’s start with a simple definition – Payroll Processing is the procedure taken to pay employees at the end of a pay period. This involves many steps to ensure that employees are paid on time and all legal obligations are met.

How long does payroll take to process?

The way you chose to process payroll will impact how long it takes. Here are the two most common payment options and how long they take to process. Note: both estimated times include one or two days for internal payroll processes.

Direct deposits take 1-3 days. This is an electronic method of paying funds into an employee’s account. The process is fast, convenient, and secure, and reduces employee wait times.

Paper checks take 2-5 days because this involves handwriting the check and mailing it to the employee. The check also needs time to clear.

Why is the payroll process important?

Payroll is a very important aspect of your business. It affects how employees feel about your business and reflects a business’s financial stability. Since employees rely on their paychecks and having them delivered on a regular basis, errors or untimely payments can create a lack of trust between employees and employers. On the other hand, when payroll is timely and accurate this can build trust and engage and motivate employees.

What is needed to process payroll?

A payroll process should be in place before you hire your first employee. Some of the things you will need to gather for payroll include:

  • A federal employer identification number also known as an EIN
  • State and local tax identification numbers (if applicable)
  • Employee tax documents (W-4, 1-9, and W-9) Click here to learn more about the differences between them
  • A payroll schedule
  • Create a company payroll policy

Payroll is an essential business function, but it can also be overwhelming. If you need help with your payroll Total Solutions would be happy to help!