Payroll checks are written on a weekly, biweekly, or monthly rotation for labor performed within any one of these periods of time. The total amount of a payroll check is the gross amount earned minus withholding of social security, medicare, and federal and state taxes. When a payroll check is written, all of the money withheld for these purposes should always be recorded on the check stub provided along with the check for the employees reference. Additionally, the with year-to-date earnings and year-to-date amounts withheld for all of these purposes should be included.
Add up all hours worked for the given pay period and multiply the hours times the rate of hourly pay to determine the total amount due to the employee. Record pay period beginning date and pay period ending date on a page in the payroll log book as "Gross Earnings". Use a separate page, or series of pages, for each employee to maintain a running log of all pay and dates paid.
Multiply the gross amount times the percentage of federal tax to be withheld based on the employees tax bracket, then subtract that amount from the gross pay. Do this same calculation for the percentages of social security (F.I.C.A.), Medicare, and state tax. Subtract them each from the gross amount and record them in the employees log under their correct headings.
Add together all amounts being withheld and then subtract the total from the starting gross amount to create the net payment to the employee for which the check will be written.
Write the payroll check in the sum of the net amount, and provide the employee a stub or a statement showing the percentages and the amounts of all money withheld from the final payroll check. Year-to-date totals should also be provided for each of the categories: total amount earned to date (gross earnings for the year), total social security withheld, total medicare withheld, total state and federal tax withheld, and total net amount paid to date.
Keep a photocopy of each paycheck and stub in the employees file in the event such copies may be demanded during a tax audit.
It is highly advisable to compare payroll software packages and to select one to use on a business computer in your office rather than keeping all records and making calculations manually. Using a computer and a printer with business check stock purchased from a business supply company can greatly reduce the amount of time spent writing out the checks manually.
Always record any wages garnished due to a debt judgment against an employee on the stub and in the log book. Your business is required by law to withhold and to submit money to a court of law when a garnishment judgment is made. The employee must be informed of the garnishment by law via an entry on a stub or on a statement.