Payroll Reconciliation

Payroll reconciliation is a financial procedure of comparing and verifying the consistency and compliance of different sources of information with the payroll records. This includes aligning the employee's earnings, taxes, benefits, deductions, and other payroll-related transaction data with the internal records, external reports, and regulations. The main aim of payroll reconciliation is to find and fix the discrepancies, inaccuracies and discrepancies in payroll data before employees are paid. The payroll process contributes to the overall financial integrity of an organization as it allows the organization to comply with the tax law and regulations, and minimizes the risk of payroll errors and fraud.
 

Example

Visualize a scenario of a medium-sized company that does payroll processing for its employees twice a month. As part of the payroll reconciliation process, the payroll division receives input data from several sources, such as time tracking systems, records of employees, benefit providers, and tax authorities as well. Payroll team carefully examines and reconciles every element from available payroll data such as hours worked by employee, overtime, vacation accruals, tax withholdings and employee benefits deductions. They verify the payroll register against attendance records, timesheets and employment contracts to avoid omissions and mistakes. In the process of reconciling the payroll, the payroll staff locates instances of missing time entries, wrongly calculated taxes, and the discrepancy between employee earnings and benefits enrollment. This team is tasked with identifying these discrepancies, correcting any mistakes or inconsistencies, and updating the payroll register accordingly. Furthermore, they compare the total payroll expenses with the budgeted amounts and analyze variances to get the reasons for any deviations.