What Is Payroll? Definition, Meaning and Detailed Overview

Payroll problems happen faster than you expect in business. Consider employees whose only source of revenue is their monthly salary. Consider what would happen if it was not paid correctly or if it paid late. Such storage can harm staff morale and, as a result, business productivity.

Verification Transfez Account for Indonesian People in Singapore

Meanwhile, it is critical to ensure correct and timely wage payments, as well as compliance with numerous rules and regulations such as labor laws and other legal compliance. Ignorance can have legal and financial ramifications.

See Also Articles About How to Open Bank Accounts in Different Countries

How to Open a Bank Account in Australia
How to Open a Bank Account in Hong Kong
How to Open a Bank Account in China
How to Open a Bank Account in India
How to Open a Bank Account in Japan
How to Open a Bank Account in Malaysia

To guarantee that your employees are satisfied and that you comply with the law, you must first grasp what a Payroll is and how to manage it properly.

Definition of Payroll

What Is Payroll? Definition, Meaning and Detailed Overview

Payroll is a salary administration system in a business. In other words, it is the process of determining employee compensation. It is typically a task and duty of HR staff, with the calculation involving the basic salary, various benefits, bonuses, and overtime pay. It is in the sense of the employee’s total take-home pay or nominal amount received.

According to his calculations, HR personnel usually spend approximately 3 hours to two weeks per month. Typically, the computation performed after the cut-off date, period, or limit of the date to be calculated. For instance, the twentieth of each month.

What Are the Functions of Payroll?

A payroll is a list of employees who have been paid by the company. It is also the total amount of money paid to employees. As a business function, it is responsible for:

1. Create a salary policy for your organization, including flexible allowances, distribution regulations, stealing, and so forth.

2. Define the pay slip components.

3. Gather additional payroll inputs (for example, the food vendors of the organization may supply information on the amount to be recover from employees for food consumed).

4. Actual computation of gross salary, statutory and non-statutory deductions, and net salary, up to a maximum of net salary

Payroll Components

The payroll component supplied by each commercial firm is structured differently. Whether according to the employment agreement, or statutory rules, the corporation has the right to define this component.

Employees are entitled to pay while they work for the company. Each employee’s compensation is unquestionably different. This is based on employees’ contributions to a company, positions within the company, and a variety of other factors.

The following are the common five salary components: basic wage, fixed allowances, non-fixed benefits, deductions, and overtime compensation. The below paragraphs are an explanation of those common five payroll components:

Basic Salary

Employees are paid a basic pay or basic wage based on their level or type of employment. The basic compensation is determined by the regional minimum wage in the city or region. It is as well as the position and duties of employees within the organization.

In most cases, the share of basic earnings in remuneration is no more than 75 percent of the total salary earned.

Fixed Allowance

Benefits are provided by the company to its employees. Person benefits are calculated in the same way as long as the employee remains in the same role. Fixed perks gained from employers for employees include wife benefits, child support, official automobile allowances, and others.

Non-Fixed Allowance

Non-fixed allowances, unlike fixed allowances, alter every month. Allowances continue to disregard certain factors, causing the number of allowances to fluctuate. For example, in the presence of employees, the amount of profit that the company can achieve, and so on. Therefore, this amount can be affected by various causes and effects.

Tax and Deduction

Deductions in the pay component are classified into two types: fixed and non-fixed deductions. These set deductions are typically in the form of Income Tax. The amount of this salary reduction is calculated differently for each employee.

Other non-fixed and employee-related deductions, such as penalty deductions for lateness, debt installments to the company, or punishments for regulatory infractions. All of these deductions are subject to the company’s policy. As a result, not all businesses use the same payroll deductions.


Companies that employ employees for more than eight hours per day must pay overtime and include it in salary calculations. Overtime pay is a stipend paid by the employer to employees who work more than eight hours per day.

See Video How To Easily Send Money International with Transfez

Common Steps in Payroll Accounting

What is Batch Payment Processing? A Complete Guide from Transfez

The following are the steps or stages involved in the payroll accounting process:

1. Create the Chart of Accounts

The process of recording payrolls into your company’s accounts entails ensuring that the correct amount is posted to the account. Before you can record it, you must first create a payroll account in the chart of accounts (Chart of Accounts). The account you’ll need to create to track it is usually an expense or liability account.

2. Gather Payroll Reports

The next step is to record the accounting payroll entry after you’ve constructed an accounting chart. Of course, the transaction must be completed before posting a transaction to the books. The transaction that must be posted is made after processing the paycheck to ensure that the record is based on real events that occurred.

Download Transfez App

Transfez App can help you transfer money abroad more quickly and efficiently. Transfez Business can also help your business in making transactions abroad. For those of you who want to send money to relatives who are abroad because they are studying, working, or traveling, Transfez will be ready to help. This app is available on Android as well as iOS.

google play store   350px appstore

Those are some explanations related to payroll. Starting from the definition, the functions, the components, and the accounting steps. With proper management, the company will be able to perform this activity easily every month.