What’s the Best Way to Manage Payroll and Other Employee Expenses?
Payroll bookkeeping can be a bit complex. That’s putting it mildly, of course. Dealing with employee pay involves more than just cutting checks. There are taxes to withhold, benefits that accrue, and insurance to pay.
How do you keep it simple so you’re not overwhelmed by books and figures?
Where to Start?
First, let’s consider everything that payroll bookkeeping usually involves for a company:
- Gross wages, salaries, bonuses, commissions, and so on that have been earned by its employees
- Withholding of payroll taxes such as federal income taxes, Social Security taxes, Medicare taxes, state income taxes (if applicable)
- Withholding for the employees’ portion of health insurance premiums, employees’ contributions to savings plans, garnishments of salaries and wages, employees’ contributions to United Way, etc.
- Employer’s portion/expense for Social Security taxes, Medicare taxes, state and federal unemployment taxes
- Employer’s portion/expense of fringe benefits such as health and dental insurance, paid holidays, vacations and sick days, pension and savings plan contributions, worker compensation insurance, etc.
These are all factors of total employee compensation, and it’s essential to record all of them.
Employers typically keep track of these items as journal entries in their ledgers. They apply credits and debits against accounts representing each employee. It’s important to include matching entries against the company’s cash accounts.
The result is a minimum of three journal entries. The first details what the employee will see on their check. That includes the net cash payment and the tax withholding. The second is the transfer of that net payment from wages payable to cash, and the last is more complex. All of the taxes and insurance dues payable should have their own journal entry, including the ones the employee doesn’t see.
Simplifying Payroll Bookkeeping
SyncLedgers‘ services naturally include handling your payroll bookkeeping. We take this complex process off your shoulders and place clear and enlightening reports in your hands. Contact us today to make sure your employees get the right pay, and the government gets the share it requires, with no hassle!