What is Payroll Accounting?
Whether it’s a big company or a small boutique, most businesses have some form of payroll department, or at the very least, an accountant whose key role is overseeing the correct compensation of the employees. In small businesses, those who handle payroll are often a part of the human resources department and must ensure that they maintain workers privacy while they go about their other tasks.
These accountants are often tasked with compiling information about workers' salaries and/or the number of hours worked, and issuing paychecks. Prior to handing out paychecks, they verify accuracy and make any adjustments such as deductions going toward employee benefits, health care costs, and social security. In addition, payroll accountants make sure checks are given according to the rules formed by the company and are in compliance with legal payroll requirements.
This would be an appropriate career for someone who has solid problem solving skills and a multi-tasker with attention to detail. You should also excel in math, communication skills and organizational skills, and analytical and critical thinking. Payroll processing also also often makes use of specialized payroll management software, so if you have some understanding of information technology and payroll experience, you are sure to find an employer in todays job market. This experience could be as little as professional experience in an office with a college degree to back it up or, which could earn you an entry-level degree, or time spent as a payroll clerk, which will provide you with more job opportunities with potential employers as a payroll administrator or elsewhere in the department.
Additionally, as an accountant specializing in payroll, you might be asked to prepare accounting documents, schedules, and other duties associated with the company’s overall accounting department and possibly tax audits and preparation. These accountants also needs to ensure all payroll operations follow federal, state, and local laws.
If this sounds like a career path you may want to pursue, there are several steps including education requirements, relevant experience, credentials, and/or licenses you will need to get under your belt before stepping into a role as payroll staff or the payroll administrator. If you're still interested, you'll find all the answers to your questions below. You can figure out your next step or sign up for courses and get started.
Payroll Accountant Job Description
The most common task that is performed by a these specialists is the calculation of employee paychecks. Payroll accountants must keep track of employee time cards, requests for paid and unpaid leaves, as well as other factors essential to accurate payroll standards and procedures such as deductions for social security and payrll tax which the company must pay to the government if they run within the United States.
Besides making sure employees receive their regular paychecks, payroll clerks also practice taxation principles, preparing ledgers and journals, transfers, journal entries, and deposits. They see that there is appropriate disbursement of funds, and make sure employees complete certain forms.
Sometimes, payroll accountants help the company create compensation packages and employees private pension plan, along with trust-funds, group annuities, profit-sharing, thrift savings plans, and even employee stock ownership.
Aside from participating in the daily operations of a business’s payroll, specialists may be asked to be internal payroll auditors. During an internal audit, the accountant will review, evaluate and assess the accuracy of payroll and tax documents. They also work to ensure that the company is compliant with federal, state and local regulations that are relevant to the payroll reporting process.
Essentially, payroll accountants act as liaisons that perform financial and reporting activities between a business organization, its employees, and the government.
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Other Possible Job Functions
In terms of government, payroll accountants should also be well-versed in tax laws and regulations. From an employee perspective, payroll specialists are responsible for checking that the correct amount of taxes have been withheld from each paycheck. These include federal, state, and local income tax, Social Security tax, and unemployment tax at the current rate. It’s the responsibility of payroll to ensure all necessary withholdings are deducted from each of the organizations employee’s paychecks.
On the corporate and/or business side, these accountants are tasked with making quarterly payments to the Internal Revenue Service and other state and local taxing authorities. There are numerous categories of taxes on the business side such as federal unemployment tax, Social Security tax, and workers’ compensation. Businesses are required by the government to pay half of an employee’s Social Security and Medicare tax liability.
At the end of each year, payroll accountants may also be asked to compile and issue an overview and individual compensation reports to each employee, and to the government, for tax purposes.
Also, the IRS and the Fair Labor Standards Act require businesses to keep and maintain certain employee records. Payroll is responsible for ensuring that the department is following these regulations. Businesses and corporations that don't properly maintain employee records in accordance with the Fair Labor Standards Act may be subject to fines and possible imprisonment under the FLSA.
Lastly, these accountants should be familiar with the Federal Insurance Contributions Act, or “FICA tax.” This federal law is the one which requires employers and employees to pay into the Social Security and Medicare programs.
Certification and Licensure
Entry-level positions in payroll usually require a high school diploma and one year of office experience. This is how many begin a career in payroll and your job title can vary. If you land a clerical position, such as payroll clerk or assistant - some very small businesses have bookkeepers who perform some payroll tasks much as a payroll clerk does, you most likely will perform general administrative duties such as filing, faxing and copying. As you move up the ladder, you may audit time and attendance, add new employee information into the company's human resources records, and make changes to tax data or employment statuses.
As you move forward in your career, many companies prefer a candidate to have earned a bachelor's degree in accounting.
According to the U.S. Department of Labor, Bureau of Labor Statistics, most individuals will have a bachelor’s degree or a related field such as business administration, finance, statistics, actuarial science or economics to work in the payroll.
Individuals who are interested in a payroll career may take the needed training at traditional colleges and universities or online. Besides taking courses in general education, humanities, business, and life sciences, students may take core courses such as:
Advancement Opportunities for Payroll Accountants
Average Payroll Accountant Salary
Individuals interested in working in payroll as an accountant may be able to advance their careers by obtaining a Master’s Degree in Business Administration or by pursuing a Certified Public Accountant (CPA) license. There are also several specific payroll certifications that are provided by professional associations which, along with additional professional skills, will provide you access to even more job openings.
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Individuals may further opt to earn professional designations and credentials, but these are not mandatory. The American Payroll Association, which is the main professional association in the field of accounting for payroll specialists, offers two distinct certification programs:
Fundamental Payroll Certification:
This program is for those who have basic payroll knowledge and competency. The designation is awarded after the candidate successfully completes the Fundamental Payroll Exam.
Certified Payroll Professional:
This certification is best for advanced professionals in payroll. To be eligible for the designation, a person must have worked for at least three out of the five previous years in payroll. CPP qualifications also include being employed for the last 24 months, given that specific coursework was completed. A third eligibility option is offered for those who have earned the FPC certification, worked in the field for 18 months and completed specific required coursework. The designation is awarded by the American Payroll Association after the successful completion of the required examination.
Where You Can Work
As a payroll accountant, you may find employment in businesses where accounting, tax preparation, bookkeeping and payroll services are needed. Other options or alternatives may be working in a different kind of financial capacity. For example, as a billing clerk, and someone who would calculate charges for a company's customers and sending out bills. Another option is as a claims and policy processing clerk at an insurance company. This role might involve reviewing insurance applications and implementing policy changes or cancellations based on customer needs. For these positions, you would need to have at least a high school diploma.
As for senior positions, typically these require between two and five years of experience, and some employers may also want you to have an associate’s degree or certification. As a senior payroll employee, you may perform the duties of clerical or entry-level positions, but you could have many other duties. You can expect to prepare financial statements, and tax records, and calculate complex salary data. It’s highly possible you may be required to train new payroll employees. As a payroll administrator, you could have additional duties like managing a smaller group of employees.
Advanced management positions may require you to have at least five to seven years of experience and a bachelor’s degree in finance or related area. As a payroll manager, supervisor or director, you will most often work in large companies. Your responsibilities are to manage the daily operation of the payroll department by overseeing payroll systems, tax records or benefits administration, and taking on direct reports.
Salary Info and Job Outlook
If you do get hired as an accountant in payroll, the salary can vary.
The annual mean wage is $41,160, according to the most recent data from the Bureau of Labor Statistics for all workers in accounting, tax preparation, bookkeeping and payroll services. Of course, this is dependent on where you live and where you work; those in Natural Gas Distribution make an annual mean wage of $57,610.
As for the future of this career, technological advancements are expected to continue to diminish the need for payroll and timekeeping clerks. The U.S. Bureau of Labor Statistics reports a 3% decrease in employment from 2014 to 2024. You can increase your opportunities in this field by undertaking and finishing a certification program and learning to take on complex payroll processes.