Payroll Services

The United States of America is home to approximately 330 million people and the largest economy in the world.

With a huge economy United States offers a huge customer base and a highly skilled workforce across all services & industries. With such a huge workforce payroll processing is a huge market due to the complexities involved and the laws varying in each of the 50 states.

Thus, before setting up your organisation it is important to understand the payroll regulatory requirements of each state as the rules in each state vary quite significantly and the penalties for non-compliance are also severe.

In the United States Fair Labor Standards Act (FLSA) provides guidelines for employers however different states may frame their own laws which are generally favouring the workforce, so employers need to follow the state laws. The guidelines require to employers to maintain the following data:

  • Employee’s full name and social security number.
  • Address, including zip code.
  • Birth date, if younger than 19.
  • Sex and occupation.
  • Time and day of week when employee’s workweek begins.
  • Hours worked each day.
  • Total hours worked each workweek.
  • Basis on which employee’s wages are paid (e.g., “$9 per hour”, “$440 a week”, “piecework”)
  • Regular hourly pay rate.
  • Total daily or weekly straight-time earnings.
  • Total overtime earnings for the workweek.
  • All additions to or deductions from the employee’s wages.
  • Total wages paid each pay period.
  • Date of payment and the pay period covered by the payment.

Additional employer requirements include:

  • Filing Form 941 (quarterly reconciliation) at the end of every quarter.
  • Filing Form W-3 with the Social Security Administration (SSA) each year.
  • Providing all employees with Form W-2, which is the annual wage and tax statement, by January 31 of every year.

The Major Payroll Software’s used are Gusto Payroll, Paychex, ADP Payroll, QuickBooks Payroll etc.

Payroll entries

Payroll is one of the most regular compliance which the employers need to fulfil to avoid any penalties at a future date. Recording of Payroll in a timely and proper manner helps in issuance of W2 before the deadline.

One of the most crucial aspects of Payroll is the Payroll Processing Company and its reports. The recording of payroll and payment of taxes is purely dependent on the reports generated from the software on Pay period basis and on how accurately the business records payroll information on the software.

Payroll journal entries are used to record the compensation paid to employees.

The Initial Payroll Journal Entry is to record the Gross Wages, Taxes payable by the Employer, Tax deductions on behalf of Employee, contributions towards social security, pension, medical etc and the net wages payable.

Debit Credit
Salaries expense xxx
Payroll taxes expense xxx
Net Salary/Wages Payable xxx
Federal withholding taxes payable xxx
Social security taxes payable xxx
Medicare taxes payable xxx
Federal unemployment taxes payable xxx
State withholding taxes payable xxx
State unemployment taxes payable xxx
Garnishments payable xxx

The next Entry is towards payment of Taxes, Social contributions, medical, net wages.

Debit Credit
Cash xxx
Net Salary/Wages Payable xxx
Federal withholding taxes payable xxx
Social security taxes payable xxx
Medicare taxes payable xxx
Federal unemployment taxes payable xxx
State withholding taxes payable xxx
State unemployment taxes payable xxx
Garnishments payable xxx
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