What you will learn to do: Describe payroll accounting
For many companies, payroll can be one of the most significant expenses. In addition, there are other payroll related costs that add up quickly.
For example, your company hires a mid-level manager at $60,000 per year. That’s $5,000 per month. In addition to those gross wages, your company must pay into social security and medicare (Federal post-retirement savings and medical benefits) as well as Federal and state unemployment and state workers’ compensation. In addition, your company may offer subsidized health benefits and a retirement plan, as well as other perks such as education expenses, parking, life insurance, and a host of other benefits and extras that can easily cost another $2,000 to $3,000 a month.
On top of accounting for all of those items, payroll accounting involves withholding amounts from the employee’s paycheck to cover Federal income tax, the employee’s portion of social security and medicare, contributions to the company-sponsored retirement plan, health benefits, and things like child support and other garnishments, union dues, and other miscellaneous deductions. That’s why there are entire courses covering payroll accounting and entire departments to do that work in a large company.