Payroll

Payroll is the whole process of working out and paying what a company owes each person for a period: gross pay, deductions, taxes and contributions, the net amount that reaches the bank account, and the records that prove every figure. It does not end with the transfer. It ends when contributions are filed and each person has a payslip that explains the number.

It is one of the few HR processes judged in binary terms. A 2% error in a sales forecast is noise. A 2% error in payroll is dozens of people paid the wrong amount and the same number of difficult conversations, usually on the same morning.

Gross to net: what a payroll run actually calculates

Every run rebuilds the same chain for every person on the list.

• Contractual base pay, whether that is a salary or an hourly rate multiplied by recorded hours.
• Variable pay: commission, bonuses, shift premiums and overtime.
• Absence adjustments: unpaid leave, sick days at a statutory rate, unused or paid-out paid time off.
• Employee deductions: income tax, social contributions, garnishments, voluntary items such as pension top-ups.
• Employer costs that never appear on the payslip but hit the budget, which is why gross wages and true cost of employment are different numbers.
• Net pay, the figure the person actually cares about. The gap between gross and net is where most payroll questions come from.

The payroll cycle

A cycle has a frequency (monthly, semi-monthly, bi-weekly or weekly), a cut-off date after which data is frozen, and a pay date. The cut-off is the part people underestimate: a promotion approved two days late does not move the pay date, it moves into next month as a retroactive correction. Anyone joining or leaving mid-period is prorated, and anything that cannot wait for the next run, such as a termination payout, goes through an off-cycle run.

Who owns the data

Payroll sits on the border between HR and finance, and that border is where the errors live. HR owns the events: hires, terminations, role changes, salary changes, absences. Finance owns the calculation, the filing and the payment. Trouble starts when both sides keep their own list of who works here and what they earn, and the two lists drift apart over a few months. The fix is not more reconciliation meetings, it is one system where the event is recorded once and payroll reads from it.

In-house, outsourced, or a provider per country

Small single-country teams usually run payroll in-house. Once headcount grows or a second country appears, most companies move to a provider, because local rules on contributions, minimum wage and reporting change more often than an internal team can track. Companies hiring across borders often end up with a provider per country plus an HR outsourcing arrangement, and pay for that convenience with fragmented data. Independent contractors sit outside payroll entirely and are invoiced, which is a separate process that still has to reconcile to the same budget.

Where payroll goes wrong

• Changes reported after cut-off. The single most common cause of a correction run.
• Unrecorded absence and overtime. If time tracking and leave requests live outside the payroll input, someone is retyping them, and retyping is where digits get lost.
• Multiple currencies without a locked rate. The rate used must be the rate on the run, not whatever the spreadsheet pulled the day someone reopened it.
• No audit trail. When nobody can say who approved a run, every dispute becomes an investigation.

The payroll process step by step

1. Collect changes. New hires, leavers, salary changes, bonuses, absences and overtime for the period.
2. Freeze the data at cut-off. Anything later moves to the next run or to an off-cycle correction.
3. Calculate gross pay for each person, including prorated pay for partial periods.
4. Apply deductions: income tax, social contributions, pension and any court-ordered deductions.
5. Review and approve the run. Compare totals with the previous period and investigate unusual changes.
6. Pay employees on the pay date and issue a payslip to each person.
7. File and pay taxes to the authorities and post the totals to accounting.

Payroll in the UK: PAYE and RTI

In the UK, employers run payroll through PAYE (Pay As You Earn). They deduct income tax and employee National Insurance from each payment, report every payment to HMRC through Real Time Information (RTI) on or before payday, and pay HMRC the amounts due, usually by the 22nd of the following month. Employers also pay employer National Insurance on earnings above the secondary threshold and must enrol eligible staff into a workplace pension with minimum contributions. Every employee has the right to an itemised payslip.

Payroll in PeopleForce

The Payroll module prepares payroll from one source of data: salaries and raises from Core HR, approved hours from Time, absences and bonuses. Payroll cycles can be weekly, bi-weekly, semi-monthly or monthly, and rules decide who belongs to each one: legal entity, location, department or employment type. In every payroll run, pay is prorated for anyone who joins, gets a raise or leaves mid-period, and each line shows its change against the previous run before approval. Pay agreed in another currency is converted at an exchange rate from the NBU, ECB, NBP or Bank of England, locked when the run is approved.

The reviewed gross goes to your accountant or payroll provider through an export to Excel or CSV, or through the API, and that system calculates tax, contributions and net pay. The payslips it produces come back to PeopleForce as a single PDF, which PeopleForce splits by page, matches to each employee and sends for signature (payslip distribution).

FAQ

What is payroll in simple terms?

Payroll is how a company pays its employees: it calculates each person's gross pay, subtracts taxes and other deductions, pays the net amount and reports the taxes to the authorities.

What is the difference between payroll and HR?

HR manages people: hiring, contracts, absences, performance and development. Payroll is the part that turns those records into pay. HR owns the data about each employee, and payroll uses it to calculate and pay salaries.

How often is payroll run?

Most companies run payroll monthly; others pay weekly, bi-weekly or semi-monthly. The frequency often depends on local law, the type of worker and company practice.

What is a payroll run?

A payroll run is one calculation and payment of salaries for a specific period and group of employees. Regular runs follow the payroll calendar, while off-cycle runs handle corrections, bonuses or final pay.