Payroll ledgers, also known as a wage book, are a record of what you have paid to your employees. It is basically a run down of everything going out in each pay cycle.
This guide will take you through what payroll ledgers are for, the benefits of keeping track with a payroll ledger, how to use one in your own business, and a payroll ledger example to get you started.
Payroll ledgers make it easy to keep track of what you are paying employees. Timesheets can track one employee, however a payroll ledger gives you more of a birds eye view of everybody.
They include an overview of payments for both individuals and as a business, and cover details such as:
Their primary function is to make it easy to keep track and calculate wage tax deductions at tax time.
Payroll general ledgers also make it easy for your bookkeeper to reconcile wage payments.
Aside from taxes, payroll ledgers also show how much you are spending on wages. This is often one of the biggest expenses of a business. A ledger helps you balance cash flow, profits and wages.
In particular, a digital payroll ledger provides improved accuracy and efficiency in payroll data through to better data security. Automating payroll ledgers in payroll software will save you time and help you get the most benefits out of it!
Payroll ledgers help you double check that you are paying wages and deductions correctly. For example, annual leave is calculated in several different ways in New Zealand, and many companies have been caught out and had to back-pay millions of dollars in underpaid annual leave. A ledger will help you spot discrepancies and avoid penalties and mispayments.
Payroll ledgers (and payroll software!) helps you reduce costs as an employer. Through increased efficiency and reduced errors, an accurate ledger will help you keep track of payroll expenses and stick to annual wage budgets.
If there are any errors or audits, an employee payroll ledger saves you from searching through spreadsheets and archived emails. Your time is valuable, and payroll issues can steal a lot of time from you without an efficient system.
IRD requires you to keep payroll data and expenses on file for seven years. This is an easy payroll mistake to avoid! A digitized cloud ledger helps protect you from any cyber attacks or loss of data that could lead to issues with IRD down the road.
It also means that employees can easily request payslip data. Although you don’t have to send payslips every pay cycle, you still need to keep their data on file should they ever request a copy of it.
Now that you know why an employee payroll ledger is so important, let’s dive into how you can use it to your advantage.
A digitized ledger in payroll software will let you create reports based on specific data sets.
This could be for a specific time period (e.g. annual, every quarter), for a specific staff member, or by position (e.g. casual versus full-time).
Data sets are more useful to you than full reports.
For example, employee payments are split up into wages and deductions. Without specific data sets, you can’t see how much is going directly to employees and what percentage is your Employer KiwiSaver contribution (or other deductibles). Creating a data set would show you how much you are paying every year into employees’ KiwiSaver.
Depending on the size of your company, you should update and track your payroll ledger regularly. If you have payroll software, all payday filings will be updated for you automatically.
Generally most businesses process payroll every two weeks. This would be a good approximate timeline to stay on top of payroll expenses and admin.
Payroll expenses get added to the general bookkeeping ledger. Having a separate payroll ledger makes it easier to see what deductions are being made because it splits up the individual wages.
For example, the total payroll amount might show up in the general ledger as $15,000. However, 25% of that might be KiwiSaver contributions, 10% to student loan repayments, and the rest broken up into things like child support and ACC levies.
Using a payroll ledger shows you exactly where your expenses are going.
With Smartly, you can automatically add payroll data to your general ledger accounting software like Xero. Just one more way we make payroll as simple as possible!
If you are not using a digital payroll solution like Smartly, you can still make a simple payroll ledger template. You just update your ledger every time payments go out.
For this general ledger payroll example, you’ll need:
You can use the spreadsheet to calculate their deductibles if you’re not using payroll software, otherwise just have this information ready to input into the spreadsheet. You can use the IRD employee tax deduction calculator to help with this.
Each employee will get their own row, and then create columns for
At the bottom of each column you will add a spreadsheet sum calculation to add up the total for gross income, deductions etc. It could look something like this:
Payroll ledgers give you greater insight into your payroll and total wage expenses. To keep this as simple as possible when it comes to tax time, Smartly payroll software has got your back. Smartly is the payroll solution designed with Kiwi businesses in mind. We make sure that you pay the right amount, on time, every time.
Find out just how easy payroll and payroll ledgers can be with Smartly!
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If you want to learn more about how your day-to-day tasks can be made simpler, you can chat to us to get some insight on how payroll software could benefit your business. Smartly can make the complex tasks seem simple including payroll, timesheets, leave and more! Smartly takes care of most of the faffing, so you can focus on the important stuff.
