If your business has employees, it has payroll obligations. Tracking hours, bonuses, holiday pay—and everything else that goes along with compliantly and correctly paying employees—can be a headache. It is also time-consuming to complete all the necessary tasks manually, without a payroll system.
A payroll register helps keep payroll obligations and salary budgets on track, and it is indispensable for many employers.
What is a payroll register?
A payroll register tracks all payment information for each employee. It includes information like:
- Gross pay
- Deductions
- Bonus payments
- Overtime payments
- Tax withholdings
- Net pay
- Benefit payments
This information is included for each pay period and documents when the payment was made. It includes extensive detail for each employee, as well as information for all employees across any given time period.
What is the difference between a payroll register and a payroll journal or wage summary?
A payroll register is more detailed than a payroll journal or wage summary. It provides granular detail about payments to each employee, rather than lump sum payment amounts.
Additionally, payroll registers are often restricted and can only be reviewed by business owners or upper-level executives, whereas a payroll journal is generally accessible to finance team members and anyone else who needs to see payroll costs.
How is a payroll register different from a pay stub?
The information on a pay stub for an individual employee comes from the payroll register. A payroll register simply tracks all information that employees would normally find on their individual pay stubs.
Why is a payroll register necessary?
Using a payroll register is one of the most reliable and efficient ways to track payroll because it allows employers to do the following:
- Store all payroll information in one place
- Easily estimate and calculate the cash necessary to cover payroll
- Provide payroll information to insurance providers (such as for workers’ compensation insurance) or lenders
- Complete verification requests on behalf of employees (such as for getting a new mortgage or car loan)
- Ensure accurate deductions for benefits, such as retirement and healthcare
Is having a payroll register a legal requirement?
While a payroll register is not legally required for most small businesses, it can make many legal and compliance tasks simple and quick to complete. Reporting requirements at the state and federal levels all require a significant level of detail about payroll information. Having an accurate and up-to-date payroll register makes these reporting requirements a breeze.
For example, the IRS may require that you make quarterly tax payments for employees on Form 941. This payment is easy to calculate when you can refer to your payroll register for information.
Recordkeeping requirements under the Fair Labor Standards Act (FLSA)
Businesses that must follow the Fair Labor Standards Act (FLSA) are required to keep payroll records for a minimum of three years. Any company with an annual gross income of $500,000 or more must adhere to FLSA requirements. FLSA also applies to any business that produces goods that travel through interstate commerce. Check with an attorney about the specific requirements for your company.
Using a payroll register
As you enter payroll each pay period, your payroll register will track any payment you make. Those payments include each and every detail about the payment, from the employee information to the dollar figure for health insurance that both the employer and the employee paid.
Typically, a manager or business owner reviews the payroll register before issuing checks or making electronic deposits each pay period. Having someone else prepare the register and then allowing the manager to review adds another layer of oversight that will likely result in fewer errors.
Auditing a payroll register
Periodic payroll audits are a best practice. During this process, you will compare your payroll register to the actual checks and pay stubs that employees received.
You can do a complete check over a specific period as part of your audit or a spot check that pulls a few pay periods to spot inaccuracies. This auditing process is sometimes called “payroll reconciliation.”
Creating a payroll register
You can create a payroll register yourself using a payroll book or register, which is available at most office supplies stores. You should also obtain a federal tax booklet (and a state tax booklet if your state has an income tax).
A payroll register is essentially a chart of all information related to paying a specific employee. Your payroll register will reflect that information. Each employee should have their own section or page.
Include the number of hours and rate of pay for each employee to find gross pay. Then, take out deductions and tax payments to calculate net pay.
You can also create your own payroll register using a spreadsheet. However, because payroll is complicated, you might want to consider using payroll software to help you track and calculate information correctly.
The importance of getting payroll right
The right payroll software will save you time and reduce errors. Payroll mistakes can be costly for employers. The IRS will issue penalties against employers for underpayment of taxes. As an example, businesses can expect a 5% tax penalty just for failing to pay their Form 941 taxes in full, and that is just the tip of the iceberg. The IRS and several states have other penalties that may be triggered as well.
The good news is that it’s easy to stay on top of payroll—and avoid penalties—with Gusto’s payroll software.
