What is Payroll Processing? Steps, How to Do & Recommended Software

Payroll is a critical business process. It directly affects employee trust, company cash flow, and compliance with labor and tax regulations. 

When payroll is inaccurate or delayed, the impact is immediate. Employees lose confidence, finance teams scramble to fix errors, and businesses risk penalties or operational disruption.

That’s why many companies today rely on payroll software to automate calculations, reduce manual work, minimize errors, and speed up each pay run. 

Automation helps payroll teams focus less on spreadsheets and rechecks, and more on accuracy, consistency, and control.

However, payroll is not just about calculating salaries. It involves collecting the right inputs, validating employee data, applying company policies, securing approvals, processing payments on time, and producing accurate payroll records and reports. 

Without a clear understanding of payroll processing, even the best tools can fall short. So, let’s dive into it.

What Is Payroll Processing?

Payroll processing is the end-to-end workflow of managing employee pay for each payroll period. 

It covers everything from collecting payroll inputs to calculating salaries, paying employees, and issuing payslips in a timely and accurate manner.

In practice, payroll processing typically includes:

• Collecting employee and attendance data
• Calculating salaries, allowances, deductions, and taxes
• Reviewing and approving payroll results
• Disbursing payments to employees
• Generating payslips and payroll reports

Payroll processing is usually performed on a regular schedule, like weekly, biweekly, or monthly, depending on company policy. 

Because it repeats every pay period, having a standardized payroll process is essential to ensure accuracy, consistency, and compliance over time.

Payroll Processing Steps

Payroll processing follows a structured sequence to ensure salaries are calculated accurately and paid on time. 

While the tools may vary between companies, the core steps below form a standard payroll workflow used by HR, payroll, and finance teams.

1. Collect Payroll Data for the Pay Period

The process begins by defining the payroll period, whether it’s weekly, biweekly, or monthly, and collecting all relevant payroll data for that timeframe. 

This includes employee lists, payroll calendars, and any changes that affect compensation during the period.

Having a clear payroll cut-off date is critical so all teams know when data must be finalized.

2. Gather Attendance, Overtime, and Leave Records

Next, attendance-related data is compiled, including:

• Working days and hours
• Overtime hours
• Paid and unpaid leave
• Absences and late arrivals (if applicable)

Since attendance data directly affects salary calculations, errors at this stage often lead to payroll disputes later.

3. Confirm Employee Data and Payroll Components

HR or payroll teams then review employee master data to ensure accuracy, such as:

• Employment status (active, new joiner, resigned)
• Salary structure and allowances
• Benefits, deductions, and tax status

Any recent changes, salary adjustments, promotions, or role changes must be updated before payroll calculations begin.

4. Verify and Approve All Payroll Inputs

Before running payroll, all collected inputs should be reviewed and validated. This step often involves cross-checking data between HR, payroll, and finance to ensure consistency.

Many companies include an internal approval step here to prevent incorrect data from moving into final payroll calculations.

5. Calculate Gross to Net Pay

Once inputs are finalized, payroll calculations are performed. This includes:

• Gross pay calculation
• Tax deductions and statutory contributions
• Other deductions (loans, benefits, or penalties)

The result is the employee’s net pay, or take-home pay, for the pay period.

6. Run Final Payroll Checks to Prevent Errors

Before payroll is finalized, teams typically perform final checks to identify:

• Unusual pay variances
• Missing or duplicated employees
• Incorrect deductions or totals

This step helps catch errors early and reduces the risk of payroll corrections after payment.

7. Get Final Approval and Lock Payroll

After verification, payroll results are submitted for final approval by authorized stakeholders, such as HR managers or finance leaders. Once approved, payroll is locked to prevent further changes.

Locking payroll ensures consistency between payroll records and payment files.

8. Execute Salary Payments

With payroll approved, salary payments are processed through the company’s chosen payment method, usually bank transfers or payroll banking files.

Timing is critical here, as delayed payments can impact employee trust and morale.

9. Generate and Distribute Payslips

After payments are processed, payslips are generated and distributed to employees. Payslips provide a clear breakdown of:

• Earnings
• Deductions
• Net pay
  

Digital payslips are commonly used today to improve accessibility and reduce administrative work.

10. Post-payroll Reporting and Records

The final step involves generating payroll reports and maintaining proper records for:

• Accounting and reconciliation
• Tax and compliance reporting
• Internal audits and reviews

Accurate post-payroll documentation ensures transparency and supports future payroll cycles.

Payroll Processing Challenges & Solutions

Despite having defined steps, payroll processing often comes with recurring challenges, especially when handled manually or across disconnected systems.

Common Payroll Processing Challenges

Some of the most common issues include:

• Inaccurate attendance inputs, leading to incorrect salary calculations
• Frequent employee data changes, such as new hires, resignations, or salary adjustments
• Manual calculation errors caused by spreadsheets and repetitive data entry
• Delayed approvals, which can slow down payroll timelines
• Compliance risks, including incorrect tax calculations or incomplete payroll records

These challenges increase the risk of late payments, employee dissatisfaction, and regulatory exposure.

One Solution: Payroll Software

A centralized payroll processing system like Mekari Talenta helps address these challenges by standardizing and automating payroll workflows.

With payroll software, companies can:

• Centralize payroll inputs (employee data, attendance, and payroll components) in one system
• Automate gross-to-net calculations, reducing manual effort and calculation errors
• Apply built-in validations to flag inconsistencies before payroll is finalized
• Streamline approval workflows so payroll stays on schedule
• Ensure accurate, on-time payroll for every pay period

By replacing fragmented processes with a single payroll platform, HR and finance teams gain better control, visibility, and confidence in payroll outcomes.

Mekari Talenta, Payroll Software for Accurate and On-Time Payroll

To run payroll accurately and consistently every pay period, companies need more than just a checklist.

They need a system that connects payroll inputs, calculations, approvals, and reporting in one place. This is where Mekari Talenta comes in.

Mekari Talenta is a payroll software designed to help companies streamline payroll processing by centralizing data and automating key payroll steps, so HR and finance teams can run payroll with less manual work and fewer errors. To explore the full HR and payroll ecosystem, visit Mekari Talenta.

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