Payroll Explained

Article provided by Javier Loya, CEO of OTC Global Holdings

Payroll is like a list of your employees, and how much money they are to be paid. It’s not a list you keep in a spreadsheet, but it can include online time tracking results. It measures the amount of work that’s beign done for the company, so that precise payments can be distributed for that time. Payroll is crucial for businesses of all sizes, because it affects the company bottom line. Here is a brief explanation of payroll, including some things to watch out for.

Pay Day

The first thing you should do as an employer is toi establish a set payday for your employees. Pay attention to the laws in your state, as some may penalize you if you fail to meet that deadline. In those states, choose a payday carefully, and try to restructure your pay periods to be bi-monthly as opposed to weekly. You also need to make sure that your HR people have enough time to gather clocking data and process payroll.


You will need to withhold a certain amount of an employee’s wages as taxes. This includes both state and federal, so you must account for both before you distribute pay checks. Employees can also keep some of those withholdings by marking the proper boxes on their tax forms, so be sure to explain to new hires that they have the option of pocketing a bit of extra money if they need it. You will also need to withhold enough to pay the payroll and business taxes that your business owes to the government. There is a small business tax, for instance, which most small and mid-sized companies are forced to pay.


There are many ways for payroll to go wrong if you’re not careful. There are a ton of calculations to be made with regards to payroll, like taxes and benefits. Mismanaging those numbers can lead to serious problems down the road. There are also quarterly deadlines that your business must conform to, so it’s important that HR is detail oriented when processing company payroll. Sometimes, these deadlines get missed and that means financial penalties. Try not to get too upset when this happens, because it was most likely an accident. Instead, look at what went wrong and make adjustments for the future.

Final Thoughts

Payroll is a complicated undertaking, no matter what size you are. In order to make sure your payroll is processed correctly, use employee time clock software to track when punches are made so workers can be paid accordingly.

Javier Loya is a Houston businessman who has been recognized by the Houston Hispanic Chamber of Commerce as “Entrepreneur of the Year” in 2002. Loya served on the Board of Regents for Texas Southern University from 2007-2009.  Presently, he owns and operates OTC Global Holdings, which is a commodity brokerage. He is married and has two children.