Payroll process: the monthly cycle, and the parts you cannot get wrong

The payroll process is the recurring cycle that turns hours worked and salaries agreed into money in people's accounts, tax paid to the right authority, and records that satisfy an inspection years later. It is unusual among business processes in three ways: the deadlines come from outside and do not move, the penalties for getting it wrong are financial and immediate, and the people affected notice within a day.

That combination is why payroll is the process most small businesses outsource first, and why the ones who keep it in-house should run it as a checklist rather than from memory. What follows is the cycle in general terms — the specific rates, forms, deadlines and reporting obligations depend entirely on your jurisdiction and are not something to take from an article.

The monthly cycle

1. Collect the variable inputs: hours, overtime, absence, bonuses, commission, expense reimbursements that run through payroll. Cut-off date fixed and communicated, because a late timesheet is the most common cause of a wrong payslip.
2. Apply the changes to standing data: new starters, leavers, salary changes, tax code changes, pension opt-ins and opt-outs. This is where errors compound, because a wrong standing figure repeats every month until somebody notices.
3. Calculate gross to net — tax, social contributions, pension, student loan, court orders, whatever applies where you are. This is the part that genuinely needs software or a bureau.
4. Review before paying. A comparison against last month, line by line, catches the great majority of errors while they are still free to fix. Anyone whose net pay moved by more than a few per cent deserves a look.
5. Approve and pay, on the same date every month. Predictability matters more to people than the date itself.
6. File and pay the authorities by their deadline, which is usually not the same date as paying staff.
7. Distribute payslips and file the records.

The pre-payment comparison against last month is the single highest-value control in the whole cycle and takes about fifteen minutes. Most payroll errors are visible as an unexpected change: someone at zero who should not be, an unusual overtime figure, a leaver still on the run. Catching one before payment costs nothing; catching it afterwards means a correction, an apology, and sometimes a repayment conversation nobody enjoys.

What has to be kept

• What each person was paid, when, and what was deducted — retained for a period your jurisdiction specifies, commonly several years.
• Evidence behind variable pay: approved timesheets, overtime authorisations, commission calculations.
• Employment terms, tax codes and any statutory notices received about an individual.
• Proof of payments to the tax authority and pension provider.
• The payslips themselves, which most regimes require to be provided and many require to be retrievable later.
• A record of who has access to payroll data. It is among the most sensitive data a company holds, and access should be short and named.

In-house, bureau, or software

Three routes, and the choice is mostly about how much regulatory change you want to track. A bureau takes the compliance burden and costs per payslip; payroll software keeps it in-house and updates the rates for you; a spreadsheet is viable only where the rules are simple and headcount is tiny, and stops being viable the moment somebody joins mid-month. What tips the balance for most small employers is not cost but whose problem it is when the rules change — and they change every year.

Where Ettex fits, and where it does not

Being direct: we do not do payroll. There is no gross-to-net calculation, no tax tables, no statutory filing, no payslip generation and no pension integration. If you are looking for that, this is the wrong product and a bureau or a dedicated payroll package is the right one.

What Ettex Books holds is the accounting side — the payroll journal, the cost of employment in your accounts, and payments to the authorities reconciled against the bank, which is covered in bank reconciliation. The hours feeding the cycle live in employee time tracking, absence in absence management, and expense reimbursements that ride along with payroll in expense claim.