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  • Benjamin Elliott

Complete End-to-End Payroll Process Guide: Everything You Need to Know



Comprehensive End-to-End Payroll Process

Setting up and properly managing the end-to-end payroll process is a vital task for any company.


Carefully controlling this is necessary for maintaining good business performance as well as ensuring your company meets all relevant legal requirements and payroll regulations.


The exact steps in the end-to-end payroll process can look slightly different for each company depending on their relationship and agreements with employees and how the company operates.


However, the same general approach and regulations should always be maintained when planning payroll.


To help you understand this in more detail, here’s a comprehensive guide to the end-to-end payroll process, how it works, and what considerations to take into account.


What Is The End-to-End Payroll Process?

The end-to-end payroll process covers all the steps involved in compensating employees for their work. This includes paying salaries, benefits, performance bonuses, and more.


While payroll may seem like a fairly straightforward topic, there’s a lot that goes into ensuring employees are paid properly and efficiently. This includes deducting the correct taxes and staying on top of individual employee data with each payroll run.


Different businesses compensate employees differently, so it's important to have a solid understanding of how your end-to-end payroll process will operate and what specific steps are involved in getting employees paid on time.



What Does The End-To-End Payroll Process Include?

While the payroll end-to-end process can look slightly different for individual companies, here are some of the main steps that this process should include.


Gather Employee Hours

In order to do a payroll run, you’ll need to establish how many billable hours your employees have generated. This step could differ with each company because some pay per hour while others have a set monthly salary structure.


Whatever the case, ensure that you figure out how many shifts, hours, or workdays employees qualify for. This could also differ each month based on factors like unpaid leave or overtime.


Determine Gross Pay

Once you have established how many billable hours employees have racked up, you need to determine their gross pay. This is determined by total billable hours multiplied by the hourly pay rate.


Gross pay should be figured out per employee and per the entire payroll run as a whole. This is how much money the business will spend on payroll.


Determine Net Pay

Once you have the gross pay determined, the next step is to figure out net pay for employees. This is the total amount of money an employee receives after taxes and deductions.


Deductions will differ depending on the specific employee contract, what tax band they fall under, and what kind of plans or contributions are paid from their salary. This should always include PAYE tax but can include additional deductions like private medical plan payments, pension scheme payments, and so on.


Once all deductions have been made, the employee’s net pay is calculated. This is the total amount of money the employee will receive.



Approve Payroll

Ensure there is an approval process in place so that multiple people within the finance team can review and approve payroll before it is sent out. This helps you avoid payroll mistakes.


Pay Employees

Now it's time to distribute the funds to employees. You can do this manually by paying each employee one at a time, or you could set up automated payroll runs with payroll software.


Of course, it's essential that you make sure to send money to the correct employee banking details. Using the right payment software will save plenty of time, as well as ensure that you use the right details with each payment run.


Provide Pay Slips

Once employees have been paid, you’ll need to send them each a pay slip outlining their gross and net pay and all deductions. This is an important legal requirement, and it helps you keep all employees in the loop.


Of course, you’ll also need to record all payroll transactions for your business too. Ensure to keep a solid record of all payments made and all deductions so that you know exactly how much tax has been withheld from each payroll run.


The last thing you want is to calculate and record this incorrectly, only to discover miscalculated taxes later on.



Understanding Payroll Regulations

The end-to-end payroll process needs to align with your company’s payroll policy as well as your payroll regulations set out by HMRC.


Whenever performing a payroll run, employers will need to report all deductions and payments to HMRC. This includes sending an FPS after payday and reporting any employee changes to HMRC.


While a strict payroll process is important for maintaining business efficiency, businesses must also ensure that they meet all of the correct legal requirements with each payroll run. If any payroll regulations are missed, it could result in expensive fines or more complicated legal issues for the employer.


This is why setting up a well-managed payroll system is such an important task for any company.



Setting Up A Payroll Policy

A payroll policy is a set of guidelines companies create to ensure their end-to-end payroll process is accurate and meets all correct regulations. A payroll policy will typically include:


  • How the company defines a workweek and what constitutes overtime

  • How employee timekeeping will take place and how employees will log their hours

  • How frequently pay periods will take place

  • What mandatory and voluntary payroll deductions employees face

  • What the wage structure for employees will look like

  • How payroll recordkeeping will take place

  • How overtime and break periods will be compensated


Conclusion

A well-run payroll system is one of the most critical tasks involved in business management.


No business can function properly without a good payroll system in place. This system needs to be carefully managed to ensure your business operates smoothly while also meeting all relevant legal requirements.


With a strong payroll software solution, efficient recordkeeping, and a clear payroll policy in place, the end-to-end payroll process will become a lot easier to manage.



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