Sample Payroll Processing Procedures

Sample_Documents

DISCLAIMER: This is a sample template provided for informational purposes only. It does not constitute legal, tax, or financial advice. Organizations should consult their own legal and tax advisors and tailor this document to reflect their specific business needs, geographies, and applicable laws.

Document Header

Item	Details
Document Title	Payroll Processing Procedures
Company	<Company Name>
Category	Communication & Administration
Document Owner	<Total Rewards or Payroll Leader Name/Title>
Version	<Version Number>
Effective Date	<Effective Date: <Date>>
Last Review Date	<Date>
Next Scheduled Review	<Date> (every <Number> months)
Approvers	<Executive Sponsor Name/Title>; <Finance Controller>; <HR Leader>
Geographic Scope	<Country> with references to <State/Province> and local regulations
Systems in Scope	<HRIS Name>; <Time & Attendance System>; <Payroll Engine/Vendor Name>; <Bank Name>
Related Policies	<Timekeeping Policy>; <Compensation Policy>; <Overtime Policy>; <Garnishment Policy>; <Data Privacy Policy>

Purpose and Objectives

The purpose of this document is to define standardized, compliant, and auditable payroll processing procedures for <Company Name>. These procedures enable timely and accurate compensation to employees, ensure compliance with applicable laws and regulations, safeguard company assets through internal controls, and provide a clear operating model between Total Rewards, HR Operations, Payroll, Finance, and third-party vendors.

Objectives:

Ensure gross-to-net calculations comply with all applicable <Country> and <State/Province> laws and company policies
Establish a repeatable calendar with clear cutoffs, approvals, and accountabilities
Minimize payroll errors through preventive and detective controls, including reconciliations and variance analyses
Protect confidential employee data and payroll funds through robust security and segregation of duties
Support timely filings, remittances, and reporting to tax authorities and benefit carriers
Provide a positive employee experience through clear communications and predictable timelines

Scope and Applicability

In Scope

All regular payroll cycles for <Company Name> employees in <Country> (e.g., weekly, biweekly, semimonthly, monthly)
Off-cycle runs for terminations, corrections, and regulatory payments
Processing of earnings, deductions, taxes, and benefits including pre-tax and post-tax items
Funding of net pay and statutory remittances
General ledger (GL) posting and payroll account reconciliations
Year-end and quarter-end processing activities
Coordination with third-party payroll vendors, banks, and benefit carriers

Out of Scope

Global mobility tax equalization program design (refer to <Global Mobility Policy>)
Equity plan administration beyond payroll taxation of vesting/settlement (refer to <Equity Plan Document>)
Benefits plan design and eligibility rules (refer to <Benefits Plan Documents>)
Timekeeping policy rules (refer to <Timekeeping Policy>), though compliance is validated in payroll

Applicability

Applies to all employees categorized as <Employee Type: hourly, salaried, fixed-term, interns> on <Company Name> payroll in <Country>
For union-represented employees, applicable collective bargaining agreement provisions supersede where conflicts arise
For employees on assignment to or from other countries, refer to the cross-border section and <Country> tax treaties

Governance and Principles

Compliance First: Payroll must adhere to minimum wage, overtime, tax, and wage payment timing under <Country> and <State/Province> law
Accuracy and Timeliness: Target net pay accuracy rate of <Percentage>% and zero missed pay dates
Security and Privacy: Limit access to payroll data to authorized roles using least-privilege; encrypt data in transit and at rest per <Security Standard Reference>
Segregation of Duties: Separate data input, payroll calculation, approval, and funding initiation functions
Auditability: Maintain a complete change log and audit trail for all payroll-affecting transactions for at least <Number> years
Employee Experience: Provide clear pay calendars, timely pay statements, and simple issue resolution paths

Roles and Responsibilities

Total Rewards (TR)

Own compensation structures, allowances, and premium rules
Provide payroll with updates to pay programs, merit cycles, and variable pay plans
Validate alignment of payroll calculation rules with TR policy intent

Payroll Operations

Maintain the payroll calendar and runbooks
Execute preprocessing validations, gross-to-net calculations, and post-processing tasks
Reconcile payroll results to prior period and to approved inputs
Prepare funding packages and initiate payments within access limits
Maintain payroll procedures and control evidence for audits

HR Operations / HR Business Partners

Ensure timely and accurate job, compensation, and employment status changes in <HRIS Name>
Validate approvals for one-time payments and policy exceptions
Serve as the primary contact for managers on personnel changes impacting pay

Time and Attendance Team

Administer <Time & Attendance System> and enforce cutoffs
Validate timecard approvals and resolve missing or anomalous entries
Provide certified time files to Payroll by cutoff

Finance and Accounting

Approve payroll funding and review payroll GL postings
Reconcile payroll liability and cash accounts
Review and approve journal entries, accruals, and reversals

Treasury

Maintain banking relationships and payment rails
Approve wire/ACH templates and payment release above defined thresholds
Monitor returned payments and coordinate reissues

Information Technology (IT) / HRIS

Maintain integrations, user access, and data security
Support payroll system patches, testing, and incident management

Legal and Compliance

Advise on wage-hour, tax, and garnishment laws
Review policy exceptions and legal hold requirements

Third-Party Payroll Vendor (<Vendor Name>)

Provide compliant payroll engine and tax tables
Process filings and remittances per service-level agreement (SLA)
Provide audit-ready reports and secure data exchange

People Managers

Approve time and one-time payments by cutoff
Validate employee status changes and communicate promptly

Employees

Submit accurate time and expense entries
Validate personal, tax, and bank information in self-service

Payroll Calendar and Frequencies

Pay Schedules

Pay Group	Frequency	Pay Period Start	Pay Period End	Pay Date	Timekeeping Cutoff	HR Data Cutoff
Salaried <Country>	Semimonthly	<1st of Month>	<15th of Month>	<20th of Month>	<Date/Time with Time Zone>	<Date/Time>
Hourly <Country>	Biweekly	<Start Date>	<End Date>	<Friday>	<Date/Time>	<Date/Time>
Sales Commission	Monthly	<1st>	<Last Day>	<Date>	<Date/Time>	<Date/Time>

Calendar Management

Publish the annual payroll calendar by <Date> for the following year
Specify submission, approval, and cutoff times in <Time Zone> and clearly indicate regional holidays
Communicate changes at least <Number> business days in advance and obtain approvals from <Approver Title>

Example Cycle Timeline (Biweekly)

T-5 business days: Time entry due by <Time> in <Time Zone>; managers approve time by <Time>
T-4: Payroll imports approved time; HRIS personnel changes cutoff; TR submits approved one-time payments
T-3: Payroll preprocessing validations; exception resolution with HR/Managers
T-2: First preliminary gross-to-net; variance review vs. prior cycle; corrections entered
T-1: Final calculations; payroll approval meeting; funding package prepared
T: Pay date; payments released by Treasury; pay statements published
T+1: GL posting; bank reconciliation; reports archived; case queue reviewed

Data Inputs, Cutoffs, and Required Fields

Core Inputs

HRIS data: new hires, terminations, promotions, pay rate changes, cost centers, FTE status, work location
Time and attendance: regular hours, overtime, meal penalties, shift differentials, on-call, leave hours
Benefits and deductions: medical, retirement, HSA/FSA, union dues, parking, other voluntary deductions
Variable pay: bonuses, commissions, spot awards, referral bonuses, retro adjustments
Tax data: federal/state/provincial forms, local tax codes, exemptions, additional withholdings
Banking: direct deposit details, pay card enrollments, paper check indicators
Garnishments: child support, tax levies, student loans, creditor garnishments, court orders

Data Quality and Cutoffs

Require unique employee ID, effective date, earning/deduction code, cost center, and approval reference for every transaction
Inputs after cutoff are deferred to the next cycle unless mandated by law or approved as a payroll exception
Maintain a locked and versioned intake folder with time-stamped files and control totals

Control Totals and Reconciliation Fields

Headcount
Total regular hours, overtime hours
Total gross earnings by earning code
Total deductions and employer contributions
Total net pay and payment count

Pre-Processing Validation

Automated Edits and Validations

Missing or invalid bank details
Negative or outlier hours or earnings beyond <Percentage>% of prior average
Duplicate records by employee ID, code, and effective date
Eligibility checks for benefits and deductions
Location-based tax assignment and reciprocity rules

Compliance Checks

Minimum wage validation for hourly and piece-rate pay
Overtime calculation at 1.5x after <Number> hours/day or <Number> hours/week per <State/Province> rule
Meal and rest penalty pay where applicable
Paid leave accrual and usage caps under <Jurisdiction> laws
Garnishment disposable earnings limits under <Country> and <State/Province>

Variance Analysis

Compare gross pay, taxes, and net pay to prior comparable cycle by pay group
Identify employees with net variance beyond <Percentage>% or <Amount> threshold
Investigate root causes and document resolutions
Obtain TR or HR approval for material variances before finalizing

Gross-to-Net Calculations

Earnings Types

Base salary and hourly wages
Overtime at 1.5x and 2.0x where required
Shift differentials of <Percentage>% to <Percentage>% by schedule
On-call and call-back pay per <Policy Reference>
Commission plans with guaranteed draws and recoveries
Retro pay for delayed increases calculated from <Effective Date> to <Catch-up Date>
Bonuses: discretionary and nondiscretionary; sign-on and retention
Allowances: transportation, meals, mobile phone, home office
Equity-related taxable income (e.g., RSU vesting) for tax withholding

Deductions and Benefits

Pre-tax: retirement contributions up to <Annual Limit>, health premiums, HSA/FSA
Post-tax: life insurance, union dues, charitable contributions
Employer contributions: retirement match at <Percentage>% up to <Percentage>% of pay, health HSA seed amount <Amount>

Tax Withholding and Methods

Use <Country> published tables as of <Date>; update with vendor releases
Supplemental wage withholding at <Percentage>% flat or aggregate method based on <Company Name> policy and law
Local taxes applied based on resident and work location hierarchy
Additional withholding per employee election

Rounding and Proration Rules

Pay rate proration by calendar days or working days based on <Policy>
Hours rounded to nearest <Number> minutes per <Timekeeping Policy>
Tax and net pay rounding to <Number> decimals

Garnishments and Deductions Priority

Statutory taxes and pre-tax benefits
Court-ordered support and tax levies
Involuntary wage assignments
Voluntary deductions
Employer recovery items with written authorization

Special Payroll Scenarios

Off-Cycle Payrolls

Used for legal payment deadlines, underpayment corrections, and severance
Require approval from <Approver Title> and Finance if exceeding <Amount>
Use same earnings and tax rules; mark as off-cycle for GL and reporting

Terminations and Final Pay

Comply with final pay timing in <State/Province> (e.g., same day for involuntary, next business day for voluntary in certain jurisdictions)
Include payout of accrued but unused vacation where required by law or policy
Process deductions for equipment return or advances only where legally permitted and authorized

New Hires and Rehires

Validate tax forms, work authorization, and bank details prior to first pay
Apply proration for partial periods according to <Policy>

Leave of Absence (LOA)

Coordinate unpaid or partially paid leaves; apply statutory top-ups as required
Adjust benefit deductions during unpaid periods; collect arrears on return

Bonuses and Commissions

Follow TR-approved calculation files with sign-offs by <Sales Leader> and Finance
Determine supplemental withholding method per section above
Accrue and true-up as needed to align expense with performance period

Expense Reimbursements

Reimbursements are non-taxable when compliant with accountable plan rules
Require receipts and approval per <Expense Policy>; pay via payroll or AP per policy

Equity Taxation Events

For RSU vesting or option exercises, calculate withholding at supplemental flat rate or highest marginal rate per <Country> rules
Coordinate with equity platform <Vendor Name> to import taxable amounts and withholding

Cross-Border and Remote Work

Determine nexus and multi-state/province taxation; track work location days
Apply treaty exemptions and shadow payroll where applicable
Consult Legal/Tax for remote work out of <Country>

Payroll Processing Steps

Standard Processing Checklist

Lock intake folders and record control totals
Import HRIS, time, benefits, and variable pay files into payroll system
Run preprocessing edits; resolve exceptions with HR/Managers
Generate preliminary gross-to-net; review by TR and Payroll
Perform variance analyses vs. prior cycle and vs. control totals
Post corrections and rerun payroll
Review compliance audits (overtime, minimum wage, garnishments)
Obtain approvals: Payroll Lead, TR, and Finance per approval matrix
Freeze payroll run; generate final registers and net pay files
Prepare funding package with payment totals and approvals
Release payments per Treasury procedures
Publish pay statements in self-service; notify employees
Post GL entries and reconcile payroll accounts
Archive reports and evidence; close the cycle

Required Approvals Matrix (Illustrative)

Item	Threshold	Approver
Off-cycle payment	<Amount>	<Payroll Lead> and <Finance Controller>
One-time bonus	<Amount> to <Amount>	<HRBP> and <TR Leader>
Wire release	<Amount>+	<Treasury> dual control

Bank Funding and Disbursements

Payment Methods

Direct deposit via ACH/SEPA/RTGS
Pay card for unbanked employees with consent
Paper checks where required

Funding Timeline

T-1: Treasury reviews funding package; confirms liquidity
T-1: Submit ACH file to bank by <Time> for next-day settlement
T: Confirm payment status and resolve rejects
T+1: Investigate returned payments; reissue funds per policy

Controls

Dual authorization for payment file release
Positive pay for checks; daily reconcile issued vs. paid
ACH prenotes or micro-deposits for new bank accounts
Limit high-value wires; require callback verification

Post-Processing Activities

General Ledger Posting

Post gross wages, employer taxes, benefits, and withholdings by cost center and natural account
Accrue unpaid wages and bonuses at period-end; reverse next period
Reconcile payroll clearing and cash accounts within <Number> business days

Filings and Remittances

Deposit taxes by required frequency (e.g., semi-weekly, monthly) per EFTPS/agency schedules
File quarterly/annual returns by statutory due dates
Remit garnishments within agency timeframes with required remittance detail

Reporting and Archiving

Retain payroll registers, tax filings, and bank confirmations for <Number> years
Store evidence of approvals and reconciliations in <Repository Name>
Provide KPIs to leadership monthly

Change Management and Exceptions

Policy Changes

TR drafts changes; Legal reviews; stakeholders sign off
Communicate changes and update systems at least <Number> days before effective date
Run parallel validations for at least <Number> cycles post-change

Exceptions and Overrides

Document business rationale and legal review if applicable
Obtain approvals per matrix; tag transaction for audit
Limit retro adjustments to <Number> prior periods unless required by law

Implementation Guidelines

System Configuration

Align earning and deduction codes to TR policy; map to GL accounts
Configure tax engines with current rates and reciprocity rules
Define proration, rounding, and overtime rules consistent with policy and law

Integrations and Data Flows

Use secure file transfer with encryption and checksums
Define file layouts with required fields and control totals
Implement automated acknowledgments and error handling

Testing and Validation

Unit test each earning/deduction/tax scenario
Parallel test at least <Number> full cycles comparing old vs. new output
Validate GL and bank files end-to-end
Obtain sign-off from TR, Payroll, Finance, and IT

Business Continuity and Disaster Recovery

Maintain runbook for manual calculations and emergency payroll
Ensure vendor DR capabilities with RTO <Number> hours and RPO <Number> hours
Store offline backups of pay calendars and key contacts

Vendor Management and SLAs

Define SLAs: uptime <Percentage>%, support response <Number> hours, critical fix <Number> hours
Conduct quarterly service reviews and annual SOC 1/SOC 2 report reviews
Maintain escalation paths and named support contacts

Key Performance Indicators (KPIs) and Targets

KPI	Definition	Target
Net Pay Accuracy	Percentage of employees paid correctly on first pass	<Percentage>%
On-Time Payroll	Payrolls processed and funded by scheduled pay date	100%
Adjustment Rate	Off-cycle or corrective payments per 1,000 employees	<Number>
Inquiry Resolution Time	Median time to resolve payroll tickets	<Number> business days
Rejected Payments	Returned ACH/checks as a percent of total payments	<Percentage>%
Reconciliation Timeliness	Days to complete GL and bank reconciliations	<Number> days

Risk Management and Internal Controls

Access and Security

Role-based access; separate admin from processor roles
Quarterly access recertification for payroll, HRIS, and banking platforms
Multi-factor authentication and IP allowlisting for payment release

Data Integrity Controls

Control totals at file intake and after processing
Hash validation for file transfers
Exception queues monitored with SLAs

Audit and Monitoring

Maintain evidence logs of approvals, reconciliations, and funding
Perform periodic internal audits; remediate findings within <Number> days
Annual external audit support with requested samples and walkthroughs

Fraud Prevention

Callback verification for banking changes above <Amount>
Mandatory vacation and backup coverage for payroll staff
Monitor for ghost employees and duplicate bank accounts

Legal and Regulatory Considerations

Comply with wage payment timing, statement content, and recordkeeping rules in <Jurisdiction>
Observe equal pay and non-discrimination requirements for pay practices
Follow garnishment order priorities and protected earnings limits
Maintain privacy and data protection per <Country> data protection law
Year-end tax reporting by statutory due dates; provide employee forms (e.g., <Form Name>) by <Date>

Note: This document is not a substitute for legal advice. Laws vary by <Country> and <State/Province>. Consult counsel on specific scenarios.

Review and Approval Process

Document Governance

Document Owner drafts and updates procedures
Legal and Compliance review for regulatory alignment
Payroll, TR, Finance, and IT review for operational feasibility
Executive Sponsor approves final document
Publish to <Intranet Location> with version control and effective date

Review Cycle

Scheduled review every <Number> months or when material regulatory changes occur
Interim updates for minor clarifications may be issued with Owner and Approver concurrence
Maintain change log including version, date, summary of changes, and approvers

Training and Readiness

New payroll staff complete onboarding curriculum within <Number> days
Annual refresher on compliance topics (overtime, garnishments, tax updates)
Practice a mock payroll continuity drill at least annually
Maintain quick reference guides and job aids for critical tasks

Escalation and Support

First line: Payroll Helpdesk <Email/Phone/Portal> with hours of operation <Time Zone>
Second line: Payroll Operations Manager
Third line: <Vendor Name> support per SLA
Emergency after-hours escalation to <Title> via <Phone>

Audit Evidence and Record Retention

Retention of payroll registers, approvals, bank files, GL postings for at least <Number> years
Secure archival in <Repository Name> with restricted access
Maintain SOC reports, vendor certifications, and SLA performance records

Glossary of Terms

Accrual: An accounting entry recognizing expenses or liabilities incurred but not yet paid
ACH: Automated Clearing House electronic payments network
Aggregate Method: Tax method combining supplemental wages with regular wages for withholding
Control Total: A sum used to validate completeness and accuracy of data files
Disposable Earnings: Earnings remaining after legally required deductions
EFTPS: Electronic Federal Tax Payment System or equivalent in <Country>
Garnishment: Court or agency-ordered withholding from wages
Gross-to-Net: The calculation from gross earnings to net pay after taxes and deductions
Off-Cycle Payroll: Payroll run outside the regular schedule for special needs
Overtime: Premium pay for hours worked beyond standard thresholds
Prenote: Zero-dollar test of bank account details prior to live payments
Retro Pay: Back pay due to late changes in pay rate or status
Shadow Payroll: Parallel payroll for expats to handle home/host country tax reporting
Supplemental Wages: Payments like bonuses and commissions subject to special withholding rules
Tolerance Threshold: Predefined range for variances that do not require escalation

Communication Section: Your Pay at <Company Name>

Welcome to <Company Name>. We want your pay experience to be clear and predictable. Here is what you need to know so you can plan confidently and get help quickly when you need it.

When You Get Paid

You are paid on a regular schedule. For most employees in <Country>, hourly employees are paid every other <Weekday>, and salaried employees are paid twice each month on the <Dates>. Your specific dates are on the payroll calendar posted on <Intranet Location>. If a payday falls on a holiday, you will be paid on the previous business day.

What You Need To Do Each Pay Period

If you track time, please submit your hours by <Time> <Time Zone> on <Day>. Your manager reviews and approves your time the same day. If you do not submit time on schedule, your pay may be delayed until the next cycle unless required by law. Always check your pay statement on payday and contact the Payroll Helpdesk if something looks off.

Direct Deposit and Pay Statements

Most employees receive pay by direct deposit. To set this up, add your bank account in Employee Self-Service under Pay and Tax. You can split your pay into multiple accounts if you wish. If you prefer a pay card or paper check, choose that option in Self-Service. Your pay statements are available online on payday and include your hours, earnings, taxes, and deductions.

Taxes and Withholding

Your taxes depend on where you live and work and the elections you make on your tax form. If you get a bonus or commission, the tax withholding may be at a flat supplemental rate or combined with your regular pay depending on the rules we follow. You can add extra withholding anytime in Self-Service. For questions about your personal tax situation, please consult a tax advisor.

Overtime, Premiums, and Differentials

Hourly employees receive overtime according to law and policy. If you work more than <Number> hours in a week, you will generally be paid at time-and-a-half. Some schedules include shift differentials for evenings or nights. Your manager can tell you if your job qualifies for these premiums.

Changes That Can Affect Your Pay

Changes to your job, pay rate, or work location can affect your taxes and benefits. Make sure your address, tax form, and bank details are up to date. If you are leaving <Company Name>, your final pay timing depends on your location. We will follow all legal requirements and aim to deliver your final pay promptly.

Bonuses and Commissions

When bonuses or commissions are paid, you will see a separate line on your pay statement. We target the payment date listed in your plan documents. If you believe an amount is missing or incorrect, please contact your manager first. The Payroll Helpdesk can explain how it was taxed and paid.

Benefits Deductions

Your benefit costs are typically taken from each paycheck. Some deductions are pre-tax and reduce your taxable income. If you do not have enough pay to cover all deductions, we will follow the order set in our policy and may collect any shortage from a future check.

Getting Help

If you have a payroll question, please open a ticket at <Helpdesk Portal> or email <Email Address>. Include your employee ID and a brief description. For urgent concerns about missing or incorrect pay, mark your ticket as urgent or call <Phone Number>. Our team aims to respond within <Number> business days and will keep you informed until resolved.

Your Privacy

We protect your personal information. Only authorized staff can view your payroll data, and we use secure systems to process payments. If you suspect a privacy issue, report it immediately to <Privacy Contact>.

Thank you for helping us process payroll smoothly. Submitting accurate information on time and reviewing your pay statement each payday are the best ways to ensure everything goes right.

Appendix: Example Controls Checklist

Control	Frequency	Owner	Evidence
Time approval completed by cutoff	Each cycle	Managers	Time approval report
Variance analysis vs. prior cycle	Each cycle	Payroll	Signed variance workbook
Dual approval of funding	Each cycle	Payroll/Treasury	Funding approval email
Payroll GL reconciliation	Each cycle	Finance	Reconciliation workbook
Access recertification	Quarterly	HRIS/IT	Access review sign-off

Appendix: Sample Parallel Testing Plan

Select representative pay groups and scenarios (hourly overtime, salaried proration, bonus, garnishment)
Run legacy and new payroll in parallel for <Number> cycles
Compare gross-to-net by employee and by totals; investigate variances above <Amount> or <Percentage>%
Validate tax filings, net pay files, and GL outputs end-to-end
Obtain sign-off from TR, Payroll, Finance, and IT; schedule go-live and hypercare window

Document Change Log

Version	Date	Author	Summary of Changes	Approvers
<1.0>	<Date>	<Name>	Initial release	<Approver Names>
<1.1>	<Date>	<Name>	Updated cutoff times and approval matrix	<Approver Names>
<2.0>	<Date>	<Name>	Annual review; added KPIs and DR procedures	<Approver Names>

Document Information:

Document Type: Payroll Processing Procedures
Category: Communication & Administration
Generated: August 28, 2025
Status: Sample Template
Next Review: <Insert Review Date>

Usage Instructions:

Replace all text in angle brackets < > with your company-specific information
Review all sections for applicability to your organization
Customize content to reflect your company's policies and local regulations
Have legal and HR leadership review before implementation
Update document header with your company's version control information
At bottom of the document you find a short example on how the content could be communicated to end-users, for instance employees.

This sample document is provided for reference only and should be customized to meet your organization's specific needs and local legal requirements.