{"id":32322,"date":"2025-12-24T08:33:10","date_gmt":"2025-12-24T08:33:10","guid":{"rendered":"https:\/\/msadvisory.com\/?p=32322"},"modified":"2026-04-20T11:33:04","modified_gmt":"2026-04-20T11:33:04","slug":"what-is-payroll-processing","status":"publish","type":"post","link":"https:\/\/msadvisory.com\/what-is-payroll-processing\/","title":{"rendered":"Payroll Processing: Step-By-Step Guide"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"32322\" class=\"elementor elementor-32322\" data-elementor-post-type=\"post\">\n\t\t\t\t<div class=\"elementor-element elementor-element-fbad00e e-flex e-con-boxed e-con e-parent\" data-id=\"fbad00e\" data-element_type=\"container\" data-e-type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-eeb31d3 elementor-widget elementor-widget-text-editor\" data-id=\"eeb31d3\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p>What does payroll processing involve and how can you ensure a compliant payroll? Here we look in detail at how payroll processing systems work.\u00a0<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-1d714f1 elementor-widget elementor-widget-text-editor\" data-id=\"1d714f1\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<h2><span style=\"font-weight: 400\">What Is Payroll Processing?<\/span><\/h2><p><span style=\"font-weight: 400\"><strong>Payroll processing is the entire procedure of paying employees and contractors their wages and salaries<\/strong>. This is a crucial human resources (HR) function for any business, and it has to be regularly performed on a weekly, bi-weekly, or monthly schedule or following a different pay period.<\/span><\/p><p><span style=\"font-weight: 400\">Payroll staff need to calculate the earnings of each individual employee depending on how much they worked in a pay period. This can include bonus pay and other incentives, allowances, and reimbursements. They then need to figure out how much of their earnings need to be withheld for taxes, social contributions, and possibly wage garnishments. This leads to the total that the employee should be paid, and this amount is what payroll staff issue to them. They repeat this process for every employee and maintain pay records. This is the essential core of payroll processing.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-97f681c elementor-widget elementor-widget-text-editor\" data-id=\"97f681c\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<h2><span style=\"font-weight: 400\">How Does Payroll Processing Work?<\/span><\/h2><p><span style=\"font-weight: 400\">A company\u2019s payroll is normally processed by its HR personnel, either by HR generalists or dedicated payroll specialists. However, it\u2019s also possible for a company to <a href=\"https:\/\/msadvisory.com\/what-is-payroll-outsourcing\/\">outsource this processing function<\/a> to a third-party <\/span><a href=\"https:\/\/www.irs.gov\/government-entities\/third-party-payer-arrangements-payroll-service-providers-and-reporting-agents\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400\">payroll service provider (PSP)<\/span><\/a><span style=\"font-weight: 400\">. This is particularly common when expanding to a new international location and wanting to streamline back-office functions. For example, it is common for global businesses that set up a Wholly Foreign-Owned Subsidiary in China to <a href=\"https:\/\/msadvisory.com\/service\/hr-payroll\/payroll-in-china\/\">outsource payroll<\/a>.\u00a0<\/span><\/p><p><span style=\"font-weight: 400\">In either case, payroll processing can be broken down into three distinct stages: pre-payroll activities, active payroll process, and post-payroll activities. Here\u2019s how each of these stages works:<\/span><\/p><h3><span style=\"font-weight: 400\">1. Pre-payroll activities<\/span><\/h3><p><span style=\"font-weight: 400\">Pre-payroll activities include everything necessary to set up and manage a payroll process. These actions are normally performed by payroll managers in conjunction with the VP of Finance or even the chief financial officer (CFO) of a company. Here are the most common activities needed to set up a payroll process:<\/span><\/p><ul><li style=\"font-weight: 400\"><b>Obtain Employer Authorization:<\/b><span style=\"font-weight: 400\"> In most countries businesses need to register with the authorities as an employer before they can onboard team members to payroll.\u00a0 In the United States, for example, this is called the <\/span><a href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/employer-id-numbers\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400\">employer identification number (EIN)<\/span><\/a><span style=\"font-weight: 400\">. This is in addition to any tax ID number and business registrations which recognize your business as a legal entity. The EIN allows your business to pay taxes and withhold taxes from your employees.<\/span><\/li><li style=\"font-weight: 400\"><b>Register for Social Security:<\/b><span style=\"font-weight: 400\"> It\u2019s critical to register your business with the social security authorities (the Social Security Administration (SSA) in the US) so that you can hire employees legally. Registration allows you to <a href=\"https:\/\/msadvisory.com\/china-social-security-system\/\">deduct contributions<\/a> from your employees\u2019 salaries and pay your mandatory employer contributions to social security programs.<\/span><\/li><li style=\"font-weight: 400\"><b>Choose a pay period:<\/b><span style=\"font-weight: 400\"> You\u2019ll need to decide how often to pay your employees. You may be able to choose from daily, weekly, bi-weekly, semi-monthly, or monthly periods. However, this period might be pre-set by local laws or enshrined in collective agreements. Longer pay periods benefit employers by allowing them to save the resources needed to process payroll frequently. Shorter periods benefit employees by giving them quicker access to their wages.<\/span><\/li><li style=\"font-weight: 400\"><b>Set a payment method:<\/b><span style=\"font-weight: 400\"> A business will need to choose how it will pay its employees. Since actual cash payments are highly impractical and difficult to trace, companies normally choose to pay by direct deposit into employees\u2019 accounts, by check, or using pay cards. In some countries, paying in cash is not even permitted.\u00a0<\/span><\/li><li style=\"font-weight: 400\"><b>Set payroll policies:<\/b><span style=\"font-weight: 400\"> A company\u2019s payroll policies are highly influenced by labor laws, which determine how and how often employees need to be paid. However, it may also need to set its own punitive rules (lateness, absences, etc.) or incentives (bonuses, commissions, etc.), which will help define how much each employee\u2019s gross pay is in each pay period.<\/span><\/li><li style=\"font-weight: 400\"><b>Implement a payroll system:<\/b><span style=\"font-weight: 400\"> You\u2019ll need to choose a system for collecting and recording data and calculating pay. These days, this is often done using payroll software. The payroll system will either be implemented in-house by HR staff or by a third-party PSP.<\/span><\/li><li style=\"font-weight: 400\"><b>Collect data:<\/b><span style=\"font-weight: 400\"> You\u2019ll need to collect the personal information from your employees (account numbers, tax IDs, social security numbers, etc.) from your employees so you can pay them. You\u2019ll also need to set up a system for reporting their <a href=\"https:\/\/msadvisory.com\/working-hours-china\/\" data-wpil-monitor-id=\"6\">hours worked<\/a> so you can pay them accurately.<\/span><\/li><\/ul><h3><span style=\"font-weight: 400\">Active payroll process<\/span><\/h3><p><span style=\"font-weight: 400\">Once a payroll system is in place and management decisions are in place, actual payroll processing can be performed regularly. The main activities involved in processing payroll regularly include:<\/span><\/p><ul><li style=\"font-weight: 400\"><b>Validating data:<\/b><span style=\"font-weight: 400\"> A system of checks and balances will allow your payroll staff to cross-check the data they receive about hours worked, overtime, bonuses, benefits, and deductions. Before they can do their calculations, they need to ensure this data is correct, or staff will be under- or overpaid.\u00a0<\/span><\/li><li style=\"font-weight: 400\"><b>Calculating gross pay:<\/b><span style=\"font-weight: 400\"> An employee\u2019s gross pay is how much they should receive for the hours they worked during the pay period at their standard rate of pay.<\/span><\/li><li style=\"font-weight: 400\"><b>Determining additions:<\/b><span style=\"font-weight: 400\"> If an employee works overtime, earns a bonus, needs to be compensated for out-of-pocket expenses, or deserves an allowance, these amounts need to be calculated and added to gross pay.<\/span><\/li><li style=\"font-weight: 400\"><b>Determining deductions:<\/b><span style=\"font-weight: 400\"> Employers are normally responsible for withholding tax and social contributions from each employee\u2019s salary. Court-ordered wage garnishments may also need to be withheld, and these amounts are subtracted to produce the net pay amounts that each employee should be paid.<\/span><\/li><li style=\"font-weight: 400\"><b>Issuing payments of net pay<\/b><span style=\"font-weight: 400\">: Once you\u2019ve calculated net pay, you need to issue these payments to all employees. This entails issuing paychecks in the employee\u2019s name, issuing a pay card, or transferring funds to their bank account.<\/span><\/li><li style=\"font-weight: 400\"><b>Issuing payslips:<\/b><span style=\"font-weight: 400\"> Employers are legally required to issue payslips, also called pay stubs, to their employees for every pay period. These pay slips show each employee their pay breakdown and let them check its accuracy.<\/span><\/li><\/ul><h3><span style=\"font-weight: 400\">Post-Payroll activities<\/span><\/h3><p><span style=\"font-weight: 400\">While the active payroll process is the main focus of payroll processing, that\u2019s not all there is to it. Once pay has been issued to employees, there are still several activities that payroll professionals need to do to complete the process.<\/span><\/p><ul><li style=\"font-weight: 400\"><b>Paying taxes and social contributions:<\/b><span style=\"font-weight: 400\"> Employees\u2019 tax and social security deductions will have already been calculated so now it\u2019s time to submit these payments to the appropriate authorities. This includes the contributions that employers must make as well. Payroll staff send these payments and submit reports to the relevant government agencies.<\/span><\/li><li style=\"font-weight: 400\"><b>Keeping records:<\/b><span style=\"font-weight: 400\"> Payroll staff are responsible for keeping all the data for processing payments and producing records of them for future reference. Payroll software usually stores all of these records automatically, but you should also back up this data to make sure it doesn\u2019t get lost or corrupted.<\/span><\/li><li style=\"font-weight: 400\"><b>Producing internal reports:<\/b><span style=\"font-weight: 400\"> The finance department of every company needs to have accurate payroll figures in order to make their calculations and decisions. Payroll staff, therefore, need to produce reports showing payroll totals and breaking down expenses accurately. <\/span><\/li><li style=\"font-weight: 400\"><b>Auditing:<\/b> It\u2019s crucial to occasionally audit payroll to ensure that it\u2019s being performed correctly. Overpaying employees can be a big source of lost revenue for any business. Likewise, underpaying employees or making incorrect tax and social security contributions can lead to fines or even legal action.\u00a0<\/li><li style=\"font-weight: 400\"><b>Monitoring compliance:<\/b><span style=\"font-weight: 400\"> New laws and regulations may require you to make changes to your payroll process. It\u2019s important for payroll staff to keep abreast of any new laws that could affect how and how much employees get paid.<\/span><\/li><\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-d7a1125 elementor-widget elementor-widget-text-editor\" data-id=\"d7a1125\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p><strong>Payroll Processing in China: Practical Compliance Overview<\/strong><\/p><div class=\"table-responsive\"><table><thead><tr><th>Payroll Stage<\/th><th>China-Specific Requirement<\/th><th>Authority Involved<\/th><th>Compliance Risk if Missed<\/th><\/tr><\/thead><tbody><tr><td>Employee onboarding<\/td><td>Register employee for tax and social insurance<\/td><td>State Taxation Administration \/ Social Security Bureau<\/td><td>Back payments, penalties, and compliance findings<\/td><\/tr><tr><td>Gross salary calculation<\/td><td>Payroll must align with the labour contract and approved salary structure<\/td><td>Local labour authorities<\/td><td>Labour disputes and underpayment claims<\/td><\/tr><tr><td>IIT withholding<\/td><td>Calculate and file Individual Income Tax withholding through payroll<\/td><td>State Taxation Administration<\/td><td>Late fees, penalties, and tax audit exposure<\/td><\/tr><tr><td>Social insurance<\/td><td>Make mandatory employer and employee contributions<\/td><td>Social Security Bureau<\/td><td>Surcharges, enforcement actions, and employee complaints<\/td><\/tr><tr><td>Payslip issuance<\/td><td>Provide employees with a clear wage breakdown each pay period<\/td><td>Local labour authorities<\/td><td>Complaints, disputes, and inspection risk<\/td><\/tr><tr><td>Wage payment timing<\/td><td>Pay wages in full and on time according to payroll rules and contracts<\/td><td>Local labour authorities<\/td><td>Claims for unpaid wages and potential legal liability<\/td><\/tr><tr><td>Payroll records<\/td><td>Maintain payroll records and supporting documents for inspections<\/td><td>Labour \/ tax authorities<\/td><td>Audit gaps and compliance penalties<\/td><\/tr><\/tbody><\/table><\/div>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-cf718e8 elementor-position-left elementor-vertical-align-middle elementor-position-top speak-expert-new elementor-widget elementor-widget-image-box\" data-id=\"cf718e8\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"image-box.default\">\n\t\t\t\t\t<div class=\"elementor-image-box-wrapper\"><figure class=\"elementor-image-box-img\"><a href=\"https:\/\/msadvisory.com\/contact\/\" tabindex=\"-1\"><img fetchpriority=\"high\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/msadvisory.com\/wp-content\/uploads\/2024\/03\/shanghai-china.jpeg\" class=\"attachment-full size-full wp-image-21671\" alt=\"Shanghai China\" srcset=\"https:\/\/msadvisory.com\/wp-content\/uploads\/2024\/03\/shanghai-china.jpeg 1024w, https:\/\/msadvisory.com\/wp-content\/uploads\/2024\/03\/shanghai-china-300x169.jpeg 300w, https:\/\/msadvisory.com\/wp-content\/uploads\/2024\/03\/shanghai-china-768x432.jpeg 768w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/a><\/figure><div class=\"elementor-image-box-content\"><div class=\"elementor-image-box-title\"><a href=\"https:\/\/msadvisory.com\/contact\/\">Ensure Payroll Compliance in China<\/a><\/div><p class=\"elementor-image-box-description\">China payroll involves wage payment rules, IIT withholding, and mandatory social insurance contributions. MSA supports foreign businesses with compliant payroll setup and ongoing processing aligned with PRC labour and tax requirements.\n<span>Message &nbsp;\u2192<\/span><\/p><\/div><\/div>\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-eec8998 elementor-widget elementor-widget-text-editor\" data-id=\"eec8998\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<h2>Payroll Processing Checklist<\/h2><p><span style=\"font-weight: 400\">Your business can make a checklist to ensure nothing is missed in this important process. Most payroll processing checklists will include these actions:<\/span><\/p><ul><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Register a tax number.<\/span><\/li><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Register with social security offices.<\/span><\/li><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Create a payroll schedule.<\/span><\/li><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Implement a payroll system, software-based or manual.<\/span><\/li><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Collect employee information (payment information, tax number, social security number, etc.)<\/span><\/li><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Collect employee working data (hours worked, overtime, etc.)<\/span><\/li><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Verify data.<\/span><\/li><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Calculate gross pay, additions, deductions, and net pay.<\/span><\/li><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Submit payments to employees.<\/span><\/li><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Issue pay slips.<\/span><\/li><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Report on and pay taxes.<\/span><\/li><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Report on and pay social security contributions.<\/span><\/li><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Update records.<\/span><\/li><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Produce internal reports as needed.<\/span><\/li><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Audit the payroll process.<\/span><\/li><li style=\"font-weight: 400\"><span style=\"font-weight: 400\">Monitor compliance and update the payroll process as needed.<\/span><\/li><\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-b7ae958 elementor-widget elementor-widget-text-editor\" data-id=\"b7ae958\" data-element_type=\"widget\" data-e-type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t\t\t\t\t\t<p>Payroll processing encompasses not only salary calculations but also social insurance withholding, personal income tax filing, and month-end reporting to multiple government agencies\u2014manual processes prone to reconciliation errors. Automation reduces compliance risk significantly. <a href=\"https:\/\/msadvisory.com\/service\/hr-payroll\/payroll-in-china\/\">payroll outsourcing in China<\/a> processing services eliminate manual entry errors and enforce audit trails for tax authority verification. MSA Asia streamlines your payroll infrastructure. <a href=\"https:\/\/msadvisory.com\/contact\/\">Have a conversation<\/a> about payroll modernization.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>What does payroll processing involve and how can you ensure a compliant payroll? Here we look in detail at how payroll processing systems work.\u00a0 What Is Payroll Processing? Payroll processing is the entire procedure of paying employees and contractors their wages and salaries. This is a crucial human resources (HR) function for any business, and [&hellip;]<\/p>\n","protected":false},"author":11,"featured_media":32375,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"iawp_total_views":161,"footnotes":""},"categories":[283],"tags":[],"class_list":["post-32322","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-payments"],"acf":[],"_links":{"self":[{"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/posts\/32322","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/users\/11"}],"replies":[{"embeddable":true,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/comments?post=32322"}],"version-history":[{"count":10,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/posts\/32322\/revisions"}],"predecessor-version":[{"id":47316,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/posts\/32322\/revisions\/47316"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/media\/32375"}],"wp:attachment":[{"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/media?parent=32322"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/categories?post=32322"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/msadvisory.com\/wp-json\/wp\/v2\/tags?post=32322"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}