What is a payroll record? Benefits, best practices and examples

A payroll register is a convenient way to keep track of all relevant payroll information in a single, centralized location. Maintaining accurate and timely payroll records facilitates tax calculation and maintains compliance with all necessary federal, state and local laws.

If you've never run payroll before, we cover what you need to know about it.

What is a payroll record?

A payroll record is a record of each employee's salary payment information for each date and pay period. It also includes information for all employees in each given time period, so you can easily see overall totals.

Some of the information included in a payroll record includes gross wages, deductions, bonus payments, overtime payments, tax withholding, take-home pay, and benefit payments. It generally does not include taxes paid by employers, but may include federal and state unemployment taxes.

Payroll records can take many forms, from Excel spreadsheets to a physical payroll record book that is completed by hand. Some accounting software, such as ADP, offer the option to automatically generate a payroll record report, which is very convenient. However, don't confuse it with other reports that have similar names: a payroll record is not the same as a detailed payroll report, a paycheck history report, or an employee pay stub.

Payroll record structure

Each payroll record must generally include the following information:

• Name of each employee.
• Payment period.
• Payment date.
• Regular hours worked by each employee.
• Overtime hours worked by each employee, if applicable.
• The net salary of each employee.
• The pay rate for each employee.
• The gross salary of each employee.
• Federal, state and local taxes withheld.
• Employee share of Social Security and Medicare taxes.
• Any other applicable deductions (such as benefits).
• Employer benefit contributions, if applicable.
• Net payment details (paper check, direct deposit, payment card, etc.).

The payroll record should also include the totals for each item. Please note that payroll recordkeeping laws vary by jurisdiction, so be sure to check all applicable federal, state, and local laws when creating your payroll recordkeeping structure.

Example of a payroll record

Benefits of a payroll record

Maintaining a well-documented payroll record offers many advantages to your business. Here are some of the things you can do with a payroll record:

• Centralize all relevant payroll dates in one place.
• Keep track of hours and wages paid.
• Calculate how much cash is required to cover payroll.
• Forecast overtime costs for future pay periods.
• Review outbound costs for the entire organization or per employee.
• Budget tax payments for each payment period.
• Track employee deductions and withholdings.
• Provide payroll data and other information to workers' compensation and insurance providers.
• Record employee leave time.
• Reconcile payroll expenses with the general ledger.
• Validate direct deposit transactions.
• Complete your company's quarterly tax payments using Form 941.
• Maintain accurate and compliant payroll records.

Steps to create a payroll record

Creating a payroll record is not a complicated process, but you must follow a certain process to ensure that each record entry is accurate and complete. These are the steps you need to follow to create a payroll record:

1. Calculate the frequency of payroll periods. Since you need to create a payroll record for each payday, you need to know a list of upcoming payroll run dates.
2. Gather all necessary documents and information. This includes your employer identification number (EIN), state and local tax ID, federal and state W-4 forms, time card information, and compensation data for each employee. If you are adding new employees to the payroll, you will also need their I-9 form and employment application.
3. Fill out the registration. Take the information you collected in step two and use it to complete your payroll record, then calculate each employee's gross salary. If you're using payroll software like ADP, it will automatically pull most of this data from other areas of the software and do the calculations for you.
4. Determine taxes and deductions. Use the W-4s to calculate how much you need to subtract from taxes and deductions for each employee.
5. Calculate the net salary for each employee. Subtract the total amount of taxes and deductions from the employee's gross pay to calculate his or her take-home pay (also known as take-home pay).
6. Review the payroll record entry. Double-check each employee's pay entry for errors and resolve them before moving on to the next payroll record entry.

Best Practices for Using and Maintaining a Payroll Record

Protect sensitive data

Payroll records contain extremely sensitive data about your company's finances and employee personal information. For this reason, you should take steps to keep your payroll records secure and restrict access to only a handful of authorized personnel. For security reasons, we recommend staying away from physical records or Excel spreadsheets and instead opting for accounting software with features like two-factor authentication.

Update the registry frequently

Each time you create a payroll record, check it for changes and errors. Adjustments need to be made for salary increases or decreases, changes in deductions, and fluctuations in hours worked, just to give a few examples.

Stay up to date with compliance

Payroll laws can change at the federal, state, and local levels at any time. Stay up to date with the latest changes in your jurisdiction and update your payroll records to reflect the changes as soon as they come into effect.

Maintain payroll records

The IRS requires businesses to retain payroll records, including payroll records, for at least four years. Be sure to securely store your payroll records during this time period in a location where they will be safe from unauthorized access.

What does it mean to prove the payroll record?

Testing a payroll record means verifying that all of your calculations are correct and that your payroll data is accurate. You must ensure that each employee's total earnings equal his take-home pay minus the sum total of all of his deductions.

What is the difference between a payroll journal and a payroll register?

While they record salary information, a payroll record is not the same as a payroll journal. A payroll record breaks down information by employee, while a payroll journal summarizes payroll figures for the entire company. A payroll register is used to reconcile payroll and verify its accuracy, while a payroll journal is used to prepare financial statements.