What is Payroll?

A payroll is the total amount of compensation paid to employees, covering the period from one pay day to the next pay day. Thus, the payroll for a company that pays its employees on a weekly basis covers a seven-day period. This compensation amount will likely vary over time, since it may include one-time payments for overtime, bonuses, and so forth. The term also refers to a list of all current employees, along with their standard compensation amounts. Payroll is typically the largest single category of expense in a services firm, and is a major expense in most other organizations.

Payroll Processing

The processing of payroll is usually a standard function of the accounting department. There may be a group of accountants who are specifically assigned to payroll processing on an ongoing basis, or certain payroll activities may be outsourced to a third party that specializes in payroll processing. In the first case, the payroll accountants may be tasked with other activities when they are not in the peak payroll processing periods. In the latter case, the use of a third party to process payroll tends to reduce the spike in payroll labor that would otherwise be experienced by the in-house staff at regular intervals.