Payroll plays a major role in a company for several reasons.

In a company, payroll is the sum of all financial records of salaries for an employee, wages, bonuses, and deductions. In accounting, payroll refers to the amount paid to employees for services they provided during a certain period of time. Payroll plays a major role in a company for several reasons.

From an accounting prospective, payroll is crucial because, payroll and payroll taxes considerably affect the net income of most companies and they are subject to laws and regulations (e.g. in the US, payroll is subject to federal and state regulations). From an ethics in business viewpoint payroll is a critical department as employees are responsive to payroll errors and irregularities: good employee morale requires payroll to be paid timely and accurately. The primary mission of the payroll department is to ensure that all employees are paid accurately and timely with the correct withholdings and deductions, and to ensure the withholdings and deductions are remitted in a timely manner. This includes salary payments, tax withholdings, and deductions from a paycheck.

Payroll taxes in U.S.

Before considering the payroll taxes we need to talk about the basic formula for the Net Pay.
From gross pay (the salary paid to the employee) one or more deductions are subtracted, to arrive at Net Pay. Thus the employee’s gross pay ( pay rate times the number of hours worked, including any overtime) minus payroll tax deductions, minus voluntary payroll deductions, is equal to Net Pay. Payroll tax deductions play a critical role and because they are provided by law they are known as statutory payroll tax deductions.

The employer must withhold payroll taxes from an employee’s check and hand them over to several tax agencies by law. Payroll taxes include the following: