This page contains our free online payroll course. It will teach you the basics of payroll and give you the training you need to start running payroll.
The Course Covers:
The basics of payroll
How to do payroll journals
The fundamentals of payroll accounting
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This course is FREE, and no registration is required. It is perfect for beginners!
Online Payroll Training Course
Part 1: The Payroll Process
Gross and Net Wages
The Payroll Process
What is payroll?
Definition: Payroll is the accounting of employee's wages and salaries.
It includes accounting for gross wages, net wages, bonuses, commissions, tax deductions, student loan deductions, national insurance payments (social security), benefits-in-kind and other important information.
Payroll accounting also includes reporting to governmental bodies, such as HMRC.
Key Payroll Terms Explained
Gross wages - the amount paid to an employee before tax and other deductions
Net wages - the amount paid to an employee after tax and other deductions
Student loan deductions - the amount deducted from an employee's gross salary to repay the employee's student loan
National insurance (social security) - the amount deducted from an employee's gross salary to cover state pension, job seekers allowance, employment support, and other welfare support.
Other deductions - pension contributions, salary sacrifice, etc.
Why does payroll need to be done?
Employees need to be paid. Accurate payroll accounting ensures that these payments are correct and necessary deductions and tax payments are made and reported.
Wage slip, pay slip example
Wage slips and pay slips explained
A wage or pay slip shows an employee's pay and deductions for a specified period. The crucial takeaway points are:
The slip shows the details of the employer and the employee
The period the pay is for. This is generally a month but can be a week or other period
The gross pay for the period
The deductions for the period
The net pay for the period
The gross pay, deductions, and net pay to date
A wage or pay slip must be provided by law
What's involved in payroll accounting?
The payroll process can be broken into five main steps:
1. Collection of data. This includes collecting data regarding employees: employee name, employee address, identification number, etc. This also includes collecting data on how much employees have earned, i.e. A fixed salary, hours worked, commissions earned, etc.
2. Processing payroll. This is completed using payroll software. A significant part of this step is to enter wage data into the software, which will then produce payslips for each employee. This step can also include creating year-end reports for employees, such as P60's.
3. Submission of data. Once all data has been entered into payroll software, the information must be submitted to the appropriate governmental bodies. There are usually submission deadlines - so ensure everything is submitted in time!
4. Wages journals. All wages, salaries, deductions, and payments must be accounted for in the financial accounts. This is usually done through a series of journals that reflect the expenses and liabilities caused by the payroll process.
5. Make payment. Any monies owed to employees and governmental bodies are paid.
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Part 2: Wages Journals Explained
Accounting for Deductions
Wages journals explained
Wages journals are the journals used to account for gross pay, net pay, deductions, and employer costs involved in paying an employee.
They consist of:
Gross wage (expense to the company)
Net pay (liability owed to employee)
Deductions (liabilities owed to governmental and other bodies)
Wages journal examples
Below is an example of a payroll journal:
Debit gross wages expense 25,000
Credit net wages payable 15,000
Credit Government payable 5,000
Credit pension payable 3,000
Credit student loan payable 2,000
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