Payroll Processing – manage and distribute your employee’s salaries and wages

Introducing Payroll Processing – manage and distribute your employee’s salaries and wages

One of the most important parts of running a business is payroll processing. As a business owner, you must pay your employees their agreed salaries at the end of a work period. If not done properly, sorting out your employees’ payrolls can be time-exhausting and prevent you from attending to other business activities at the right time.

There are different methods through which payrolls are processed. Payroll processing can be done manually or by using computer software. This article will teach you how to process your payrolls easily using a third-party service app.

What is Payroll?

Payroll is a list of employees entitled to payments with other work benefits and the amount each employee will receive. It includes the record of previous payments, bonuses, and taxes to be deducted. With a payroll, an employee will be able to receive payment for the work they have done. It is simply the gross calculation of every payment and deduction entitled to an employee.

What is payroll processing?

Payroll processing is the process of paying employees in a company which involves gathering the number of hours the employees worked, calculating the taxes and other deductions, distributing the salaries, and reporting and remitting taxes to the right parties.

Payroll processing is done in stages, and it usually takes a lot of time to complete the process, especially when done manually. 

To prepare a payroll, you need to;

  • Determine your pay frequency: Do you want to pay weekly, bi-weekly, or monthly?
  • Determine how you want to pay your employees: Is it by cheque or direct bank transfer?
  • Determine the payroll processing method you want to use: Do you want to process your payroll manually, outsource it, or use computer software to process it?

Steps to take in payroll processing

There are steps taken in payroll processing, ranging from when an employee has accepted their employment letter to when they are paid for their services. Below are the steps in processing payroll.

1. Collection of employee payment details

This stage usually happens at the point of entry of a new employee into an organization. The HR will ask the employee to provide information to help them process the new employee’s payroll.

2. Tracking of work time

The next step in payroll processing is to track each employee’s work time. This step includes calculating the regular hours worked, overtime hours, and paid-off times. The result from this calculation will help determine the number of days an employee is to be paid. 

3. Calculation of employee’s gross pay

After you have gotten the details about the work time for each employee, the next step is to calculate their gross pay. This calculation usually divides the annual salary by the total number of months the worker has worked for. For instance, a worker is meant to earn an annual salary of ₦2.5 million. To calculate their gross monthly pay, you must divide the ₦2.5 million by 12, provided the worker has worked for 12 months. The calculation result will leave you with ₦208,333.33, which is the gross monthly salary for the worker.

4. Subtraction of taxes and other deductions

At this stage, you already know the gross pay for each employee. The next thing to do is subtract taxes and other deductions from the gross salary wherever applicable. Employers must remit a certain amount from every employee’s salary as tax to the Internal Revenue Service.

5. Salary Payment

After subtracting taxes and other deductions, you will arrive at each employee’s net pay. The net pay is the take-home salary given to the employee on payday. You must determine the method through which you want to pay salaries to your employees. You can either pay by;

  • Direct deposit
  • Cheques
  • Cash
  • Mobile wallets

6. Filing and depositing taxes

After you have paid your employees, the next thing to do is to remit the taxes to the appropriate government bodies responsible for the collection of taxes.

7. Keep records

After the payroll process, you are expected to keep records of each payment to make the records available for future inspections by the IRS.

How to run your payroll processing

You must determine how you want to handle your payroll processing. You can handle it manually, outsource it, or use third-party software.

  1. Do it yourself: This option is time-consuming and can be very stressful. Your HR will have to go through the stress of calculating the net pay for each employee, after which they have to calculate and remit the taxes to the tax bodies. This method is usually prone to error, especially human errors.
  1. Outsource it: This option is expensive but will give enough time for you to attend to other business activities. You can outsource your payroll processing to third-party companies whose job is solely processing payrolls for organizations.
  1. Use third-party software: Register with an online third-party service like Earnipay to help you with payroll processing. The beauty of this method is that you do not have to do much. You just have to supply the basic payment information for each employee and allow us to process your payroll.


Payroll processing is an important aspect of every business. As an employer, you must ensure your workers are getting paid correctly. The payroll process can be stressful when done manually, but you can eliminate the stress involved in processing payroll by introducing Earnipay. With Earnipay, you can run your payroll processing without having to do it yourself because our system will do it for you! You will have enough time to attend to other business activities for growth.

Hurry now to to find out more about our payroll processing product.

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