The simple answer is that payroll is a means by which we pay our employees, while collecting statutory taxes, then paying those taxes and reporting the taxes and associated wages to various local, state and federal government agencies in a timely fashion.

Then payroll begins to get difficult. We have to track various information about our employees, such as pay rate or even rates if we pay them different amounts for different functions or times of the day that we ask them to work. We track their address, phone number, social security number and their W-4 withholding status.

We might also track one or more types of paid time off, such as vacation or sick, or we might even call it paid time off. We track the accrual based on our company policy, when it is used and the available balance.

We take various deductions from our employees paychecks. Benefit deductions so that we can provide health, dental, vision and life protection to our employees and their families. We might take back a payroll advance that we had given the employee earlier. Various tax deferred retirement investments could be taken and forwarded to investment companies.