Payroll Processing Methods

Topics: Application software, Responsibility, Payroll Pages: 3 (596 words) Published: July 13, 2015
Payroll Processing Methods

There are four payroll processing methods:  It does not matter which payroll processing you use, the employer is responsible for ensuring that all calculations are done correctly and that third party remittances are made on time…..ignorance is not bliss when it comes to Revenue Canada and payroll’s responsibilities.  The four methods are:

Manual, Outsourced, Purchased software or In-house developed Software.


Mainly used for small payrolls (under 20 employees) with little or no special circumstances. Recording of all information is done by employee and kept in a payroll journal. Gross earnings are calculated for all hours worked.

Statutory deductions are calculated using manual tables (CPP, EI and income tax). Cheques are hand written for each employee and recorded in the cheque register for reconciliation at a later time. Monthly payroll journal entries are summarized, balanced and entered into the general ledger. Monthly government remittances are completed from summarized information. Monthly bank reconciliation of cashed cheques is done.

All other monthly remittances (benefit carriers etc) are completed. It is the company’s responsibility to keep up to date on all legislative changes. Other deductions are withheld to result in net pay for each employee.


Mainly used for medium – larger sized companies who don’t want the responsibility of managing an in-house payroll software system. Internal responsibilities include collection of employee information (forms upon hire, wage increases, hours worked, changes to benefit deductions etc), as well as entering general journal entries once received back from vendor, and cheque reconciliation. Vendor responsibilities include: calculation of payroll, cutting of employee cheques, creation of general journal entries every payroll, and all government remittances and reporting plus providing year-end T4’s and documentation….these various facets can...
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