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Payroll

The total compensation paid to employees and the administrative process of calculating wages, withholding taxes, and maintaining compliance with employment tax law.

Payroll refers both to the total amount a business pays its employees and to the process of calculating and distributing those payments. The process includes computing gross pay (hourly rate × hours worked, or salary ÷ pay periods), withholding federal and state income tax, Social Security (6.2%), and Medicare (1.45%), and remitting those withholdings to the government.

The employer also pays a matching share of Social Security and Medicare (7.65% of gross wages), plus federal and state unemployment taxes (FUTA/SUTA). The total employer cost of an employee is roughly 108–112% of gross wages before benefits.

Payroll errors — missed withholdings, late tax deposits, incorrect W-2s — create penalties from the IRS and state agencies. For this reason, most small businesses use payroll software (Gusto, Square Payroll, QuickBooks Payroll) or a payroll service (ADP, Paychex) rather than processing manually. See Hiring Your First Employees for payroll setup and Small Business Bookkeeping for recording payroll transactions.

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Business disciplines accounting terms
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Cite

@misc{emsenn2026-payroll,
  author    = {emsenn},
  title     = {Payroll},
  year      = {2026},
  note      = {The total compensation paid to employees and the administrative process of calculating wages, withholding taxes, and maintaining compliance with employment tax law.},
  url       = {https://emsenn.net/library/business/domains/accounting/terms/payroll/},
  publisher = {emsenn.net},
  license   = {CC BY-SA 4.0}
}