Purpose

The purpose of this SOP is to standardize monthly payroll operations, reduce errors, ensure compliance with tax and labor laws, and create a repeatable structure for salary disbursement. It ensures that employee compensation is accurate, timely, and properly documented.

Scope

This SOP applies to all full-time, part-time, and contract employees within the organization. It is primarily executed by HR and Finance teams and includes coordination with department managers and external payroll providers (if applicable).

Roles & Responsibilities

• HR Manager
• Maintains employee records, updates payroll changes (e.g. new hires, terminations, benefits), and ensures accurate input data.
• Finance/Payroll Specialist
• Prepares, verifies, and processes the payroll. Handles statutory deductions, bank file preparation, and liaises with payroll software or providers.
• Department Managers
• Submit timesheets, approve overtime, and notify HR of any status changes or anomalies.
• Executive Approver
• Reviews and authorizes final payroll for processing.

Process Steps

1. Pre-Payroll Preparation (Days 1–3)

At the start of the payroll cycle, HR pulls updated employee data from the HRIS: new hires, terminations, promotions, leave balances, and benefits enrollment. HR then cross-checks any employee status changes with managers and verifies final leave records for accuracy.

Timekeeping data, including attendance logs and approved overtime, is submitted by each department head. These are validated against internal scheduling or timesheet tools. Any discrepancies or missing submissions are flagged for correction.

2. Payroll Input Compilation (Days 4–6)

The payroll specialist compiles all necessary inputs, including:

• Base salaries and wages
• Overtime payments
• Bonuses or commissions
• Deductions (benefits, garnishments, taxes)
• Reimbursements or allowances

The data is entered into the payroll system (manual or automated). A first-pass payroll report is generated for internal verification. This draft includes gross pay, deductions, net pay, and total payroll cost.

3. Internal Review & Verification (Days 7–9)

Finance reviews the draft payroll report for inconsistencies, outliers, or missing data. HR validates that all policy-based deductions and entitlements (e.g. paid time off, unpaid leave) are correctly applied.

A reconciliation is performed comparing payroll totals to budget forecasts. Any unusual payments (e.g. large bonuses, back pay, manual adjustments) are reviewed and justified.

The verified draft is sent to an executive approver or the CFO for final sign-off.

4. Payroll Finalization & Processing (Days 10–11)

Upon approval, the finalized payroll is processed. This may involve:

• Submitting the payroll batch to a third-party provider
• Generating encrypted bank files for direct deposit
• Preparing payslips for distribution via email or portal

The payroll specialist confirms all salary transfers are scheduled for the designated pay date. Any failed transactions or banking issues are monitored and resolved immediately.

5. Statutory Reporting & Filing (Days 12–14)

After disbursing salaries, the finance team calculates and files required tax and benefits reports, which may include:

• PAYG withholding
• Social security or superannuation contributions
• Health insurance deductions
• End-of-month payroll summaries

All filings are completed in accordance with jurisdictional deadlines. Confirmation receipts are stored for audit purposes.

6. Post-Payroll Audits & Recordkeeping (Days 15–20)

A post-payroll audit is conducted to verify:

• Correct net pay amounts
• Statutory compliance
• Payslip accuracy
• Timeliness of deposits

Payroll reports, bank confirmations, and tax filings are archived in a secure, access-controlled location. Any anomalies are logged for review in the next payroll cycle.

Documentation & Tools

• Payroll software or spreadsheets
• Timesheet submissions and leave records
• HRIS system reports
• Payslip templates
• Bank file upload system
• Tax/benefits filing platforms

Compliance & Policy Requirements

• Adherence to local tax and labor regulations
• Timely submission of statutory contributions
• Maintenance of accurate payroll records for audit trail (minimum 5 years)
• Confidential handling of employee salary data per company privacy policy

Let me know if you’d like this version formatted into a reusable BlueDocs template with sections, headers, or checklist integrations. I can also generate a lighter “summary” version for dashboard visibility or for audit teams.