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, a payroll accountant whose key role is overseeing the correct compensation of the employees.
Payroll accountants are often tasked with compiling information about workers' salaries and/or the number of hours worked, and issue paychecks. Prior to handing out paychecks, they verify accuracy and make any adjustments. In addition, payroll accountants make sure checks are given according to the rules formed by the company.
This would be an appropriate career for someone who is a strong problem solver and multi-tasker. You should also excel in mathematical skills, analytical and critical thinking, as well as organization.
Additionally, as a payroll accountant 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. A payroll accountant also needs to ensure all payroll operations follow federal, state, and local laws.
If this sounds like a career you may want to pursue, there are several steps, credentials and/or licenses you will need to get under your belt before stepping into a payroll accountant’s chair.
Payroll Accountant Job Description
The most common task that is performed by a payroll accountant 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.
Besides making sure employees receive their regular paychecks, payroll accountants also practice taxation principles, preparing ledgers and journals, transfers, journal entries, and deposits. Payroll accountants 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 private pension plans, 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 department, payroll accountants may be asked to be internal payroll auditors. During an internal audit, the payroll 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 the payroll department is 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. It’s the responsibility of payroll accountants to ensure all necessary withholdings are deducted from each employee’s paycheck.
On the corporate and/or business side, payroll 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 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 accountants are responsible for ensuring that its payroll department is following these regulations. Businesses and corporations that fail to properly maintain employee records in accordance with the Fair Labor Standards Act may be subject to fines and possible imprisonment under the FLSA.
Lastly, payroll accountants should be familiar with the Federal Insurance Contributions Act, or “FICA tax.” The federal law 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. If you land a clerical position, such as payroll clerk or assistant, 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 as a payroll accountant, 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 field of payroll accounting.
Individuals who are interested in payroll accounting careers 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
Individuals interested in payroll accounting may be able to advance their careers by obtaining a Master’s Degree in Business Administration or by pursuing a Certified Public Accountant license. There are also several specific payroll certifications that are provided by professional associations.
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 payroll accounting, offers two distinct certification programs:
Fundamental Payroll Certification:
payroll individuals. The 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 payroll professionals. To be eligible for the designation, a person must have worked for at least three out of the five previous years as a payroll professional. CPP qualifications also include being employed for the last 24 months, given that specific course work 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 Certified Payroll Professional 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 a payroll accountant, 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, and payroll accountants in Natural Gas Distribution make an annual mean wage of $57,610.
As for the future of payroll accounting, 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.