Payroll Accounting: Definition and Benefits

What is Payroll Accounting?

Payroll accounting consists of  a company’s recording of its employees’ compensation including:

  • gross wages, salaries, commissions, bonuses, and so on that have been earned by its employees
  • withholding of payroll taxes such as federal income taxes, Medicare taxes, Social Security taxes, state income taxes (if applicable)
  • withholding for the employees’ portion of health insurance premiums, garnishments of salaries and wages,  employees’ contributions to savings plans, employees’ contributions to United Way, etc.
  • employer’s portion/expense for Medicare taxes, Social Security taxes, state and federal unemployment taxes
  • employer’s portion/expense of fringe benefits such as health and dental insurance, vacations and sick days, paid holidays, worker compensation insurance, pension and savings plan contributions, etc.

Benefits of outsourcing payroll

You can do a direct deposit

Without the help of an outside payroll processing company, it is challenging to deposit money directly to your team members’ accounts. Nowadays, every company, big or small, has understood the benefit of it. When you are an SME owner, you also want to walk with the competition. Outsource the work to a professional company and get rid of the tiring and error-prone method of working on individual payroll account. Direct deposit eliminates the possibility of fraud and mismanagement.

You have total peace of mind

When you own an SME company, there are thousands of things you are supposed to handle. When the payroll processing is handled by someone else, you get peace of mind. Your HR and accounts need not put their precious time into calculating and processing wages and salaries. It is mundane and repetitive work. Payroll management companies have the essential infrastructure to manage the processing load. You sign a service contract and enjoy a smooth, industry-standard service. Process accuracy and system security are guaranteed by the service provider.

Satisfied employees

Incorrect paycheck causes distress and frustration within your employees. When there are repeated calculation errors, they lose confidence in the organization. It causes disengagement, and ultimately it causes employee churn. Even if employees do not leave the organization, but they will not give their 100% efficiency. Hence, it is important to get their confidence by getting Outsourcing payroll solution SMEs.When you own an SME business, you can recognize many factors that prevent profitability and hinder productivity growth if you handle payroll in-house.


When you meet a business owner or manager who can recognize 1 or more of these factors that prevent productivity and hamper profitability centred around the time and cost related to administering your payroll, one can usually find a business case to make the switch for outsourcing payroll. You must know the Importance of Payroll Outsourcing and key advantages of it. Assuming the payroll provider does a quality job and serves

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